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Institutions remain significantly underinvested relative to target allocations
Research - NOVEMBER 11, 2021

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Institutions remain significantly underinvested relative to target allocations

by Andrea Zander

Despite decreased returns in 2020, institutional investor confidence in commercial real estate remains strong, reaching a nine-year high in 2021, according to Hodes Weill & Associates and Cornell University’s Baker Program in Real Estate’s ninth annual Institutional Real Estate Allocations Monitor. Pensions, sovereign wealth funds, insurance companies and other institutions continue to look to real estate as an important portfolio diversifier, hedge against inflation and source of stable income.

Actual returns declined significantly in 2020, from 8.5 percent to 5.9 percent, owing to a decline in property valuations resulting from vacancies, cash-flow risks and uncertainty related to the COVID-19 pandemic. However, the vast majority of institutions view this decline as an episodic event and remain optimistic for 2021, as valuation metrics climb to all-time highs.

The “Conviction Index” in this year’s survey, which measures institutions’ view of

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