The global credit crunch, volatile commodity prices and macroeconomic uncertainty have created a challenging investment environment. As institutional investors seek to mitigate risk, more assets are flowing into alternative asset classes. Watson Wyatt’s 2008 Global Alternatives Survey, published earlier this year in conjunction with Global Investor, found a 40 percent increase over the previous year in the volume of alternative assets under management on behalf of pension funds, within which real estate accounts for 62 percent.

As is the case with many other asset classes, the current economic environment has led to falling returns from commercial real estate. The latest U.K. Monthly Property Index figures from IPD, the Investment Property Databank, for example, show a total return for the 12 months to A