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Alternative Market Briefing

Institutional investor demand for commercial real estate at 7-year high

Wednesday, October 23, 2019

Laxman Pai, Opalesque Asia:

Global institutional investor appetite for commercial real estate is the highest it's been in seven years, despite concerns about asset valuations and weakening economic growth, said a survey.

Average target allocations to real estate increased 10 basis points to 10.5% in 2019, up some 160 basis points since 2013, said an annual survey conducted by Hodes Weill & Associates and Cornell University's Baker Program in Real Estate.

It also implies the potential for an additional $80 to $120 billion of capital to be allocated to real estate over the coming years.

This marks the second straight year that confidence in the asset class has increased after five years of steady decline, according to seventh annual Institutional Real Estate Allocations Monitor, which surveyed 212 institutional investors in 24 countries.

The 2019 survey's "Conviction Index," which measures institutions' view of real estate as an investment opportunity from a risk-return standpoint, increased from 5.1 to 5.7. This rise is reflective of the fact that institutions continue to realize investment results well over target returns.

Given late-cycle concerns, institutions are utilizing leverage prudently and prioritizing allocations to cycle-resistant strategies including credit and niche asset sectors.

"Globally, we're in a yield-starved environment, and real estate has proven to be one of the few asset classes where investors can still f......................

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