Institutional Investors Plan to Rein in Real Estate Investments in 2020

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Apr 22, 2020, 10:00 ET

NEW YORK and SAN RAMON, Calif. and SINGAPORE and LONDON, April 22, 2020 /PRNewswire/ -- Global institutional investors, such as pension funds, endowments, and foundations, plan to reduce their new capital commitments to real estate by an average of 11 percent in 2020, according to the 24th annual Institutional Investors Real Estate Trends report, conducted by Institutional Real Estate, Inc. and Kingsley Associates. In addition, the survey reveals U.S. investors plan to commit $70 billion of new capital to real estate this year, down from $75 billion in 2019.

"Our survey is a little different in that it's forward-looking," explained Jim Woidat, executive vice president with Kingsley Associates. The survey is designed to identify institutional investors' plans for real estate in 2020 and "helps us understand what investors are thinking about," added Woidat.

The survey focuses, in particular, on the largest and most influential investors who are driving trends in the market. Responses were gathered between Nov. 12, 2019, and Feb. 4, 2020, from 196 institutional investors, including 129 U.S.-based investors and 67 investors from the rest of the world, representing $8.85 trillion in total assets under management and $874 billion in real estate assets. The survey was conducted prior to the rise of global concerns about the expansion of the novel coronavirus disease COVID-19 — but it does reflect a late-cycle investment mood and conveys what investors are thinking about for their long-term plans.

Looking at their investment intentions in 2020, planned new capital is 11 percent lower than actual commitments in 2019, and 40 percent of investors expect their capital flows to real estate to be lower than the previous year. U.S. investors are projected to invest $70 billion in new capital in 2020, down from $75 billion in actual capital flows in 2019.

"Plans for 2020 new capital commitments to real estate are down for both domestic and foreign investors," said Woidat.

It is important to note, however, over the past few years, investors have shown a tendency to underestimate their actual real estate commitments.

Regionally, both U.S. and non-U.S. investors rated the United States as the most attractive region for investing in real estate. The attractiveness of investing in U.S. real estate is the highest it has been in several years, noted Woidat. Investors were also positive on Northern Europe, Australia and Japan.

Trends in property type preference remained largely in line with 2019, as industrial, multifamily and medical office properties remained the most attractive for U.S. investors.

A report detailing the complete results of the survey is available on IREI's website. Click here to purchase.

ABOUT INSTITUTIONAL REAL ESTATE, INC.
Institutional Real Estate, Inc. is an information company that produces publications and conferences for institutional real estate and infrastructure investors around the globe.

ABOUT KINGSLEY ASSOCIATES
Kingsley Associates provides business intelligence for the real estate industry. The firm offers research services and customizable tools and benchmarks to help property owners and investors maximize their portfolio and organizational performance.

SOURCE Institutional Real Estate, Inc.