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Institutions pass 10% mark in RE targets

NEW YORK CITY—Global institutional investors’ average target allocation to real estate has crossed the 10% threshold for the first time since 2013, says Hodes Weill & Associates. That being the case, though, the pace of annual growth has moderated from between 30 and 40 basis points over the preceding four years to 20 bp this year to 10.1%, according to the fifth annual Institutional Real Estate Allocations Monitor.

Conducted by Hodes Weill and Cornell University’s Baker Program in Real Estate, the Allocations Monitor shows that many institutions fall short of that 10.1% target. Although 92% of the 244 institutions surveyed are actively investing in real estate, “portfolios remain approximately 100 bps underinvested relative to target allocations,” the report states. Approximately 60% of institutions are under-invested in real estate relative to their target allocations, up from 50% in 2016.

The moderating growth pace extends to closing the gap between target and actual allocations. Although 22% of institutional investors surveyed indicated that they expect to increase their target allocations over the next 12 months, that’s down from 30% who said the same thing a year ago.

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