ABANA Institutional Member, Hodes Weill & Associates, published the 2025 Real Estate Allocations Monitor, which gathers information on 166 investors representing 26 countries managing $14.7 trillion in total assets ($1.4 trillion in real estate), showing that institutions are rebalancing their real estate strategies due to shifting market conditions. After several years of stability, target allocations declined slightly in 2025 as investors responded to macroeconomic uncertainty, low portfolio returns, and growing competition from infrastructure and private credit. Despite this recent pullback, hope is growing as institutions are getting increasingly confident with the stabilization of the market, believe valuations have bottomed out, and anticipate higher returns and improved investment opportunities in the coming years.
Key Takeaways:
– Allocations Fall Slightly in 2025: With allocations held steady for three consecutive years, institutions lowered target real estate allocations by 10 basis points to 10.7% in 2025, reflecting market conservatism. Forecasts, however, project a 10-bps increase in 2026 based on increased conviction among EMEA investors.
– Underallocation Gap Widens: Institutions remain underweight with real estate at approximately 90 bps, up from 60 bps in 2024. The gap is expanding due to reduced capital deployment and improved performance in other asset classes, including public equities.
– Returns Rebound, Conviction Improves: Institutional portfolios posted a modest 1.4% return in 2024, up from -1.4% in 2023, and the outlook is becoming increasingly positive due to stabilizing fundamentals and a belief that valuations have bottomed.
Read the full 2025 Institutional Real Estate Allocations Monitor here.