The gap between actual and target allocations to global real estate narrowed substantially year over year in 2018, according to a survey, which showed that most investors expect their allocations to increase over the next two years.
The global Investment Intentions Survey 2019, published by the European Association for Investors in Non-Listed Real Estate Vehicles, the Asian Association for Investors in Non-Listed Real Estate Vehicles and the Pension Real Estate Association, showed that current average allocations to real estate rose to 10.0% from 8.9%, while target allocations increased to 10.4% from 10.2%.
Global institutional investors remain generally bullish on real estate as compared to other asset classes, with 50% hinting at boosting their allocations over the next two years and 9.3% anticipating a dip. Moreover, 80.4% of investors by assets-under-management expect to increase allocations.
Among North American investors, 38.5% expect their allocations to rise, while 15.4% expect a decrease. The bulk of European investors expect to lift their allocations, while most investors from Asia-Pacific do not expect any change.
In the U.S., investors see New York as the most preferred market for investment in 2019, followed by San Francisco and Los Angeles. The survey also identified office and residential as the most popular sectors for investment in 2019, followed by industrial.
Value-add is still seen as the most attractive investment style in 2019, with 53% of investors hinting that it is most attractive on a risk-adjusted basis.
According to the survey, 29% of investors plan to engage in development in the U.S. in 2019, with the highest interest coming from non-U.S. investors.
Commingled funds emerged as the platform of choice for institutional investors, with 42% of investors saying they will see an increase in usage in the next two years.