KEY FINDINGS OF THE 2025 INSTITUTIONAL REAL ESTATE ALLOCATIONS MONITOR

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1. After holding allocations steady from 2022 through 2024, institutions decreased target allocations by 10 bps in 2025. Target allocations declined to 10.7% in 2025, which can be attributed to concerns regarding market uncertainty, as well as competition for allocations from other sectors including infrastructure and private credit. Notably, institutions are expecting to increase target allocations by 10 bps in 2026, led by institutions in EMEA that report the highest conviction. 
    

2. Institutions remain under allocated to real estate, with the gap between target and actual allocations widening year over year. Over the past two years, the denominator effect has reversed, driven by a slowdown in capital deployment, strong gains in other asset allocations (in particular public equites) and modest real estate returns. Institutions report being under allocated to real estate by approximately 90 bps, up from 60 bps in 2024; this margin represents a return to the average level of under investment over the past 10 years. 
    

3. Institutional real estate portfolios saw a modest rebound in returns in 2024, though performance continues to lag target returns. Institutional portfolios delivered a return of 1.4% in 2024, up from -1.4% in 2023. On a trailing 10-year basis, real estate portfolios have underperformed target returns, largely driven by returns reported in 2023 and 2024. For the 13-year period through 2024, portfolio returns averaged 8.5%, slightly outperforming target returns. With a view that portfolio valuations have bottomed, institutions are anticipating more favorable portfolio performance over the next few years.
    

4. Conviction trending positive, as institutions express optimism about investment opportunities over the next several years. The Real Estate Allocations Monitor Conviction Index rose slightly in 2025, with sentiment improving among institutions in the Americas and EMEA, while APAC remained steady year over year. Investors cited greater clarity on interest-rate trajectories and stabilizing market fundamentals as drivers of renewed confidence, viewing the next several years as a “good entry point” for capital deployment.
    

5. While the share of institutions managing their real estate portfolios exclusively in-house is rising, the vast majority of institutions continue to rely on third-party managers and allocate to commingled funds. Nearly two thirds of institutions report outsourcing their entire real estate portfolio to third-party managers, though the share of institutions managing their entire portfolio in-house increased. Over a quarter of institutions are looking to form new manager relationships (up from 22% in 2024) as they look to replace managers in their portfolio that have underperformed. 
    

6. Investors continue to favor value-add strategies, though appetite for core and core-plus strategies has increased. Investors are taking a more measured approach to risk in the current environment and report an increased appetite for lower returning strategies and a decline in appetite for value-add and opportunistic strategies year over year. The shift towards core and core-plus strategies can be attributed to sentiment that valuations have bottomed. 
    

7. Institutions in the Americas report an increase in cross-border investment activity, whereas APAC- and EMEA-based institutions indicate a decline. North America continues to be the dominant destination for institutional real estate capital flows, supported by the market’s scale and liquidity – even as some investors temporarily moderate new commitments to the U.S. due to continued uncertainty regarding tariffs and geopolitical risk. Notably, institutional appetite for European and Australian investments has increased year over year. 
    

8. Closed-end funds remain the primary investment vehicle within institutional real estate portfolios, though appetite for structures offering greater investor discretion increased. While appetite for closed- and open-end funds increased, so too did appetite for direct investments, separate accounts and joint ventures, underscoring a growing appetite for structures allowing investors to exert greater influence over investment decisions. 
    

9. REITs remain an important component of institutional real estate portfolios, offering liquidity and access to core strategies. Approximately one-third of institutions invest in REITs, with nearly 90% doing so through their real estate allocation. Institutions view REITs as complementary to private real estate holdings, providing liquidity and access to large-scale, diversified core portfolios. 
    

10. ESG adoption drops as regional divergence and political polarization are reshaping institutional priorities. The percentage of institutions with ESG policies declined slightly in 2025, marking the first decrease reported since 2015. This decline was led by institutions in the United States, while investors in Canada, EMEA and APAC continue to prioritize ESG policies and integration.