The Chinese proverb—“may you live in interesting times” —seems to ring true in today’s financial market. Just ask real estate investors faced with the uncertainty of future Fed monetary policy, the path of inflation, the tough year for equities, and sagging retirement portfolios. The Business Roundtable just reported CEO sentiment is deteriorating, with falling earnings estimates, a shaky housing market, and remaining supply chain issues.
Meanwhile, consumer spending is up, savings are down, and borrowing is growing—even as interest rates are rising.
In a lunchtime capital markets panel at the 2022 ULI Florida Meeting in Miami, top real estate investment leaders shared insights on investing in today’s uncertain environment and more specifically, in Florida. The prevailing takeaway seemed to boil down to an investor’s risk tolerance in uncertain times.
“There are things that we know we don’t know. We know activity has started to slow. The economy has started to slow. But what we don’t know is exactly how all these dynamics will play out,” said Darin Mellott, director of research & analysis for CBRE. “We know the inflation story is global, it’s persistent, and it’s high. There are some glimmers of hope here. It appears to be peaking. The central bank has been hiking at a record pace, not just here in the U.S., but across the globe, and this presents particular challenges for capital intensive industries such as ours.”
In the face of these unknowns, what are investors expecting? Recession or not, we’re in much choppier economic waters today. Real estate can be complicated but at its core, it’s supply and demand, said Jonathan Pollack, Sr., managing director, Blackstone. Even with a focus on migration, job growth and asset classes, the unpredictability of interest rate cycles adds to market nuance.
“If you ask 20 different experts on Wall Street that are in research roles and you get 20 different answers,” he said. “It’s very hard to predict so that means you stay close to home and do things that seem safer and more obvious in a world that could be headed into a recession or more challenging environment.”
Warren de Haan, managing partner and Co-CEO with ACORE Capital, compared this moment to the opening weeks and months of the pandemic. People thought “return to work” and normalcy was around the corner. “We all need hope,” he said.
“I’m not a rocket scientist, but CEOs are going to reduce their consumption. Put those factors together, along with everything else that’s going on, and that leads me to believe I need to be on defense, not offense right now for my portfolio,” he said. “That will play out for us at Acorn in two ways…. getting ahead of the issues, great communication with our borrowers and investors, and secondly, what will happen from that, the opportunistic stuff, special situations, high-yield lending opportunities.”
This “lag effect” is critical, said Lauren Hochfelder, co-CEO and head of Americas for Morgan Stanley Real Estate Investing. Undue optimism related to high retail spending and consumer optimism leaves us “wanting to believe positive things…and easy to be lulled into this belief that it’s all good. The reality is that the impact on the consumer…will push us into a mild recession. Europe will be even more dramatic.
“Once we have more clarity, the markets will recover reasonably quickly, so we need to stay active during this market environment,” she said. “Once we get to a place where these guys get back to lending at an attractive rate and you can adjust your costs of capital back, it’s less interesting.”
Lack of certainty among the Fed is not unreasonable, given they’re dealing with the continued fallout from “one of the largest financial experiments of all time, which was $10 trillion in cash just being given out to the world,” Pollack said. “That just has to filter through somehow. I don’t think anyone can tell you how this plays out.”
Rate hikes and quantitative tightening, as well as increased regulation are putting pressure on the market. Spread conditions in the real estate market in the coming year are equally uncertain given market conditions. Risk versus capital type, in the absence of liquidity, coupled with rate instability, “the big traditional bond buyers are not as active as we want them to be,” de Haan said. “When they become active again, when we achieve some rate stability, even if that rate range is on the higher end, we should see the bond buyers come back in. They’re an important part of the ecosystem, because that will drive spreads down, and the second thing it will do, it will clear off some of the collateral from the bank’s balance sheets into the securities market.”
What will the future hold, once this settles out remains puzzling? Preferred property types, or those considered “lily pads” for safe investments will continue to be industrial, interim housing, self-storage, and life science in the right markets, Pollack said. Hochfelder believes capital will return to retail, somewhat in response to sales, yield premiums and creative financing, as well as those in preferred places.
Some take the view that “whether we’re right or wrong, we want to be leveraged in more secular tailwinds than cyclical ones. Twenty or 30 years ago, 75 percent of institutional real estate was in office and retail, and today, those are dirty words.”
Mellott wondered where there may be cause for concern. De Haan spoke of downsides affecting multifamily, which could face affordability or construction cost issues.
Statewide, Florida has outperformed other markets, from its influx of population and regulatory drivers, and investors have taken note. Asked whether they appreciate one Florida market over another, or if one outpaces the rest, Hochfelder noted that the entire state is enjoying the “demographic tailwinds,” yet Miami’s arrival as a “gateway market” sets it apart. “Some of the other markets referenced are very, very strong secondary markets.”
What should give investors confidence in Florida, from city hall to Tallahassee, is that “politicians are playing to win,” Pollack said. “If you want to be where there’s growth, there’s going to be growth in Florida because they all want the growth and they’re coming after it aggressively.”
De Haan has been asked whether Miami “will get a black eye” from the FTX debacle and crypto fallout. He believes quite the opposite.
“Miami showed everybody that they’re open and intelligent about attracting talent, they are business friendly, the infrastructure is here, and they’re open for business,” said De Haan.
Source: ULI
Which CRE Assets Are The Best Options For 2023?
Commercial real estate investors in the Americas favour multifamily and industrial as their top investment choices for 2023.
In the evolving market, the recent survey by global real estate firm Colliers reveals that investors are anticipating asset value declines in the coming year, due to the higher cost of capital, construction, and operations, as well as availability of product.
There has already been a rapid pricing reset in the US, UK, and some other countries, but it has not been universal.
Colliers expects stabilization of the global real estate market by mid-2023.
David Amsterdam, president, US Capital Markets & Northeast Region, says that, in the US, investors will find opportunities in the gateway markets as liquidity events force decision making.
The report also shows that investors in the Americas are less concerned that their EMEA and APAC peers about deglobalization, demographic pressure, and currency fluctuation. Inflation remains a key concern for its impact on asset values.
The top investment choice for 2023, as cited by respondents to Collier’s global poll, is multifamily.
The asset class has led US sales volume in recent years and is set to continue.
Industrial takes second place with last mile distribution properties continuing to try to capture momentum from e-commerce. This is also seen as a defensive strategy due to strong occupancies and rising rental rates in this asset class.
ESG-compliant properties in central business districts are the key focus for office investors: “ESG is beginning to have a meaningful impact on investment decision making,” the report states. However, in secondary markets, value-add is more important than energy efficiency.
For retail, grocery-anchored centres are the top choice while luxury is the key for hotel investments.
Life science, data centres, and student housing are the main focus areas for alternative asset classes. Core investors have the most negative outlook on office, as 55% expect losses for the asset type.
The report highlights that investors have more capital on the sidelines than ever before, ready to jump on opportunities.
Source: Wealth Professional
CRE Predictions For 2023: Distress, Opportunity And Another ‘Roller Coaster’ Year
After the last three years, there are few real estate professionals brave enough to make confident predictions about what will happen in 2023 — other than to say once again to expect the unexpected.
Commercial real estate enters 2023 pointing in the opposite direction as it did a year ago. The Federal Reserve has pushed its benchmark rate to 4.5% after starting 2022 near zero, a rapid change in the state of affairs that has ground sales volume to a standstill and killed deals around the country.
Rents at multifamily and industrial properties have soared this year, but amid the Fed’s aggressive campaign to rein in inflation, demand for both has started to come down. More significantly, demand for office space has never approached pre-pandemic levels, and office occupancy is still below 50% of what it was in most large markets.
Meanwhile, predictions of a recession next year — and whether the overheated recovery will end with a hard or soft landing — have intensified. Nothing is predictable these days but something of general consensus is taking place on apartment rents, the U.S. economy, return to office and how the Fed may behave in 2023.
It might not turn into a nightmare year along the lines of 2008 — but it certainly “won’t be pleasant,” CBRE predicted — and it will likely be defined by what doesn’t happen more than what actually does.
Bisnow spoke to nearly a dozen industry leaders to gather predictions for the year ahead in CRE. Here is what stood out:
The Housing Crisis Won’t Abate, Even As Rents Stabilize
Eye-watering rent increases are expected to keep slowing down this year after posting records in 2021 and the beginning of 2022.
Shimon Shkury, founder of multifamily sales brokerage Ariel Property Advisors, saidrental growth will no longer see a rapid ascent, but he doesn’t expect it to start coming down because “there’s not a tremendous amount of new product that is opening up.”
That spells bad news for the tens of millions of Americans who are paying more than 30% of their income on rent. The housing crisis isn’t going away next year — and it will likely get worse, Nuveen Impact Investing Senior Portfolio Manager Pamela West said.
She said housing is a “purple” political issue and is on governments’ agendas more than in previous years, but the required urgency is not yet there, and it’s unlikely to show up in 2023.
Recession? Maybe. But Distress Is Coming
The predictions on the style of recession vary wildly, from deep to shallow to not coming at all.
Goldman Sachs, for its part, has put the chances of a recession at 35%. Almost uniformly, real estate players have arrived at the conclusion that some form of correction will come next year, particularly for deals made at the top of the market last year.
Marx Realty CEO Craig Deitelzweig is predicting a “shallow” recession, characterized by companies shedding employees following the hiring spree in 2021. His company has been lying in wait for opportunities to pounce on assets whose owners aren’t able to withstand the current market conditions.
A sluggish market makes for a tough time for appraisers, said Grant Norling, a co-founder at Valcre, a software company for appraisal firms, but next year is set to bring more activity for the industry as owners, and their lenders, face challenges with their assets.
Office Usage Will Rise With The Threat Of Layoffs
Office usage is top of mind for 2023 across the board, with some predicting workers will try to ease their fears about the state of the economy by heading into the office more frequently next year.
Deitelzweig predicted office occupancy will jump by 10%, while Shkury said he thinks usage “absolutely” is going to go higher. Steiker-Epstein of Charney Cos. said 2023 is more likely the year office owners accept the workplace is fundamentally altered.
Calanog took another viewpoint: While employers might demand more workers back at their desks — and some are already doing so — that phenomenon might proved short-lived.
Interest Rates Could Start Coming Down Before Year-End
Last week, the Federal Reserve hiked the benchmark interest rate half a percentage point, hitting its highest rate in 15 years. The targeted range reached between 4.25% and 4.5% — and Fed officials are now forecasting raises to be around 5.25% by the end of 2023. Real estate has a more optimistic take, however.
Industrial Down, Retail Up
Industrial real estate, long the darling of the industry, could be facing a challenging 2023.
Speculative construction has been the norm — of the record 700M SF of industrial space under construction in the middle of 2022, just 26% was pre-leased, according to Cushman & Wakefield.
But in a complete reversal of fortune, there is a growing sense that the worst is over for the embattled retail market.
Sublease space dropped nearly 11% last quarter and leasing velocity was up 7.4% year-over-year in Manhattan, per the brokerage.
Source: Bisnow
Florida Investors Remain Confident Despite Financial Knowns And Unknowns
The Chinese proverb—“may you live in interesting times” —seems to ring true in today’s financial market. Just ask real estate investors faced with the uncertainty of future Fed monetary policy, the path of inflation, the tough year for equities, and sagging retirement portfolios. The Business Roundtable just reported CEO sentiment is deteriorating, with falling earnings estimates, a shaky housing market, and remaining supply chain issues.
Meanwhile, consumer spending is up, savings are down, and borrowing is growing—even as interest rates are rising.
In a lunchtime capital markets panel at the 2022 ULI Florida Meeting in Miami, top real estate investment leaders shared insights on investing in today’s uncertain environment and more specifically, in Florida. The prevailing takeaway seemed to boil down to an investor’s risk tolerance in uncertain times.
In the face of these unknowns, what are investors expecting? Recession or not, we’re in much choppier economic waters today. Real estate can be complicated but at its core, it’s supply and demand, said Jonathan Pollack, Sr., managing director, Blackstone. Even with a focus on migration, job growth and asset classes, the unpredictability of interest rate cycles adds to market nuance.
Warren de Haan, managing partner and Co-CEO with ACORE Capital, compared this moment to the opening weeks and months of the pandemic. People thought “return to work” and normalcy was around the corner. “We all need hope,” he said.
This “lag effect” is critical, said Lauren Hochfelder, co-CEO and head of Americas for Morgan Stanley Real Estate Investing. Undue optimism related to high retail spending and consumer optimism leaves us “wanting to believe positive things…and easy to be lulled into this belief that it’s all good. The reality is that the impact on the consumer…will push us into a mild recession. Europe will be even more dramatic.
Lack of certainty among the Fed is not unreasonable, given they’re dealing with the continued fallout from “one of the largest financial experiments of all time, which was $10 trillion in cash just being given out to the world,” Pollack said. “That just has to filter through somehow. I don’t think anyone can tell you how this plays out.”
Rate hikes and quantitative tightening, as well as increased regulation are putting pressure on the market. Spread conditions in the real estate market in the coming year are equally uncertain given market conditions. Risk versus capital type, in the absence of liquidity, coupled with rate instability, “the big traditional bond buyers are not as active as we want them to be,” de Haan said. “When they become active again, when we achieve some rate stability, even if that rate range is on the higher end, we should see the bond buyers come back in. They’re an important part of the ecosystem, because that will drive spreads down, and the second thing it will do, it will clear off some of the collateral from the bank’s balance sheets into the securities market.”
What will the future hold, once this settles out remains puzzling? Preferred property types, or those considered “lily pads” for safe investments will continue to be industrial, interim housing, self-storage, and life science in the right markets, Pollack said. Hochfelder believes capital will return to retail, somewhat in response to sales, yield premiums and creative financing, as well as those in preferred places.
Some take the view that “whether we’re right or wrong, we want to be leveraged in more secular tailwinds than cyclical ones. Twenty or 30 years ago, 75 percent of institutional real estate was in office and retail, and today, those are dirty words.”
Mellott wondered where there may be cause for concern. De Haan spoke of downsides affecting multifamily, which could face affordability or construction cost issues.
Statewide, Florida has outperformed other markets, from its influx of population and regulatory drivers, and investors have taken note. Asked whether they appreciate one Florida market over another, or if one outpaces the rest, Hochfelder noted that the entire state is enjoying the “demographic tailwinds,” yet Miami’s arrival as a “gateway market” sets it apart. “Some of the other markets referenced are very, very strong secondary markets.”
What should give investors confidence in Florida, from city hall to Tallahassee, is that “politicians are playing to win,” Pollack said. “If you want to be where there’s growth, there’s going to be growth in Florida because they all want the growth and they’re coming after it aggressively.”
De Haan has been asked whether Miami “will get a black eye” from the FTX debacle and crypto fallout. He believes quite the opposite.
Source: ULI
Sale-Leaseback Market Comes In Hot To End 2022
The sale-leaseback market continued to shatter records in November despite declining M&A activity and rising interest rates, according to new research from SLB Capital Advisors.
There were 237 discrete transactions in the third quarter nationally, pushing the period to the strongest quarterly performance in deal count since Q4 2019. Dollar volume was down, however, over Q2 figures as no large casino transactions closed.
The Northeast led sale-leaseback dollar volume with $1.6 billion in deals, while the South had the most number of transactions at 87, followed by the West region with 72. Industrial was a major driver for sale-leaseback activity and accounted for 58% of all such transactions in the quarter.
The majority of all sale-leaseback deals are in the $5 million to $25 million range. However, marquee deals for Q3 included Boston Properties’ acquisition of Biogen’s HQ for $592 million and Oak Street’s acquisition of a QVC/HSN distribution portfolio for $443 million.
SLB analysts say the fourth quarter of 2021 was the ”best pricing environment to date,” with pricing holding strong throughout most of the first part of the year. Cap rates began to widen in Q3 as buyer caution ramped up, however. But “while pricing has widened, strong credits and robust business models are still driving attractive pricing from investors, even in non-core markets, particularly in the industrial real estate sector,” SLB analysts say.
In addition, net lease REITs had a banner quarter, reporting $4.4 billion in acquisitions for Q3 2022, a figure in line with the previous four quarters. Net lease REITs also continued capital formation in Q3 with $1.9 billion in equity offerings.
M&A activity also declined across the quarter, though SLB says “a massive amount of capital” estimated at $800 billion remains available for attractive acquisitions. M&A deal value for Q3 fell by 50% from the peak set in Q4 2021, and “with future earnings of companies discounted at higher rates, there is a significant impact to valuations across sectors,” SLB analysts say. All told, 4,457 deals closed for a combined value of $490 billion, declines of 19% and 4%, respectively from Q2 to Q3.
Source: GlobeSt.
Auto Dealership Breaks Ground In Coconut Creek With $16M Loan
A Mazda dealership broke ground in Coconut Creek after the dealer secured a $16.14 million construction loan.
Toyota Motor Credit Corp. provided the mortgage to Pompano Autoplex LLC, managed by Don Lia of Huntington, New York-based Lia Motor Group. His company owns 10 dealerships, including Mazda of Palm Beach.
The loan secures the 5-acre site at 3757 Coral Tree Circle. The dealer purchased the property for $5.1 million in 2020 and demolished an office building there. It was previously used by Waste Management.
Coconut Creek Mazda was approved for a two-story building of 16,094 square feet for a showroom, sales center and offices. It would be attached to a three-story building of 90,582 square feet, consisting of 8,898 square feet of auto service with 16 repair bays and a parking garage. There would be 455 parking spaces on the site between the surface parking and the garage, including 318 spaces for dealer inventory.
The dealership was designed by J.A.O. Architects & Planners in Boca Raton.
While it might seem odd for Toyota to finance construction of a Mazda dealership, the two automotive companies have been working closely together since forming an alliance in 2015. Toyota owns a minority stake in Mazda.
Source: SFBJ
Miami, South Florida Still Great Place To Invest, Financial Experts Say
In spite of rising interest rates and an uncertain economy, South Florida’s commercial real estate market is still an attractive place to invest in, finance experts say.
That was the general consensus among those who spoke at Tuesday’s Urban Land Institute’s Florida Summit at the JW Marriott Marquis Miami.
During a panel discussion on capital markets, panelists Acore Capital managing partner and co-CEO Warren de Haan; Morgan Stanley Real Estate Investing co-CEO Lauren Hochfelder; and senior managing director Jonathan Pollack said credit markets have tightened significantly as the Federal Reserve raised rates in an effort to control inflation. As a result, investors and lenders have become more particular with where they put their money.
However, South Florida and the rest of the Sunshine State are still appealing places for investors thanks to its rising population and openness toward business.
Due to remote working trends in most of the U.S., office buildings elsewhere are seen as a risky endeavor. But in South Florida, the return-to-work trend is about 86%, compared to New York and San Francisco which is “half of that,” Hochfelder added,
De Haas, who recently moved from Los Angeles to Miami, said he was struck by the positivity of the people living in South Florida who desire to “do good” and “move the economy forward.”
Since the pandemic, wealthy individuals, well-paid professionals, and businesses have been migrating to South Florida thanks to the lack of a state income tax, decent weather, and a pro-enterprise atmosphere, brokers and developers have told the Business Journal. This has resulted in rising rents for apartments, industrial, retail, and office.
CBRE’s Director of Research and Analysis Darin Mellott, who moderated the panel discussion, said the post-pandemic migration is part of a broader story across the Sun Belt, a region in the southern U.S. where taxes are generally low. However, he added, the growth that took place in South Florida outperformed other Sun Belt metropolitan areas.
Yet, rougher times are coming for South Florida. As the years go by, so, too, will the adverse effects of climate change and sea level rise.
In the more immediate timeframe, Mellott said the nation as a whole will likely face a mild recession next year with unemployment reaching as high as 5%.
Source: SFBJ
Small Market, Suburban Office Sales Take The Lead
Small market and suburban office sales lately are holding up better than their urban counterparts for three reasons: they are smaller assets, they are better basis plays, and they are typically occupied by users who are more likely to have returned to work, according to Craig Tomlinson, Senior Vice President of Northmarq.
He tells GlobeSt.com this and that for Q3 22 in the net lease office sector, there were 71 arm’s length sales in small markets and 90 large (primary) markets.
For small markets, the average deal size was 34,000 SF and avg sale price was about $8.5 million and modest $245.00 SF.
In large markets, Tomlinson said the buildings averaged 54,000 square feet, selling for $25.5 million, a “whopping” $480 per square foot,” Tomlinson said.
Tomlinson said all these factors gave small market office a leg up and he expects the trend to continue.
Flight to Quality ‘Will Drive Tenancy for Foreseeable Future’
The Newmark Office Report finds that “overall transaction cap rates have been stable, but there have been some relatively notable shifts within the office market. The spread between central business district (CBD) and suburban cap rates had closed in 2022.
Furthermore, Newmark’s report said that flight to quality “will drive tenancy for the foreseeable future, though high-quality assets in dynamic suburban markets may hold an advantage over traditionally stable downtown assets.”
Relatively high availability, downward pressure on rents and greater demand for a vibrant worker experience will benefit the upper tier of the office market.
For those with more risk appetite, capitalizing on low pricing for Class B+/Class A- buildings with plans to modernize “could be attractive, along with build-to-core in markets structurally lacking in top-tier office space.”
Source: GlobeSt.
People Continue To Relocate To Florida In Record Numbers
Despite any detrimental weather events, a record high number of relocating US homebuyers are figuring, “How can we not afford to move to Florida.”
Their reasoning is for affordability’s sake, as half of the top 10 migration destinations are in Florida (Cape Coral, North Port-Sarasota and Orlando are on the list, along with Miami and Tampa), reported Redfin this week.
This, despite Hurricane Ian, one of the deadliest, most destructive storms in US history, landing in the Sunshine State in September.
In October, with no data yet to show what impact the hurricane will have had, GlobeSt.com reported that migration to Florida could fall in volume, according to John Burns Real Estate Consulting (JBREC).
Anywhere But Here
Overall, 24.1% of U.S. homebuyers looked to move to a different metro area in the three months ending in October, which is on par with the record high of 24.2% set in the third quarter and up from roughly 18% in 2019.
Significantly higher mortgage rates, elevated inflation and a somewhat choking economy has cooled the US housing market over the second half of 2022, leading many to seek relative affordability elsewhere.
Las Vegas and Sacramento are other attractive alternatives among Sunbelt markets. Conversely, homebuyers looked to leave San Francisco, Los Angeles, New York, Boston and Washington, D.C., according to Redfin.
Source: GlobeSt.
Industrial Cap Rates Expected To Rise But Outlook For Seasoned Investors Remains Strong
Industrial has been on quite a tear over the past few years, as changes in consumer behavior have driven demand for more logistics and fulfillment facilities in key markets.
And according to one industry expert, the sector should stay a favored asset class for experienced investors, despite rising capital costs.
With that said, however, Burns said “depending on the what and the where, I would not be surprised to see cap rates widen another 50 to 100 basis points.”
Burns will discuss what’s happening in the capital markets in a session at next month’s GlobeSt Industrial conference in Scottsdale, Ariz. He says Stonebriar’s definition of industrial includes not just warehouse and distribution facilities, but manufacturing, life sciences, cold storage and data centers as well, and notes that “each of those sub-categories have their own dynamic and, broadly, all are growing.”
As the costs of debt capital rise, Burns says Stonebriar’s underwriting will continue to focus on the sponsor, asset and market and “that won’t change.”
Ultimately, a recession seems likely and Burns says the changing economic landscape will have “varying impacts” on investors and individual markets alike.
Source: GlobeSt.
Institutional Investors Eye CRE Despite Slump In Confidence
Institutional investors are continuing to increase target allocations to real estate despite the first decline in confidence among the segment in five years.
The tenth annual Institutional Real Estate Allocations Monitor by Hodes Weill & Associates and Cornell University’s Baker Program in Real Estate notes that “decreased conviction coupled with portfolio overallocation has resulted in a slowdown of deployment pacing,” but adds that institutions are expecting to increase allocations to real estate by 30 basis points to 11.1% next year.
The survey’s conviction index, which measures institutions’ view of real estate as an investment opportunity from a risk-return standpoint, declined from a ten-year high of 6.5 in 2021 to 6.0 in 2022, reflecting what analysts are calling a “cautious view” of the market.
Meanwhile, target allocations to real estate ticked up for the ninth straight year to 10.8% in 2022, signaling the potential for an additional $80 to $120 billion of capital allocations to CRE. Institutions are forecasting a further increase of 30 basis points in 2023, which would be the largest year-over-year increase in nearly a decade. Institutions in the Americas are expecting to increase allocations by 40 basis points, while those in the EMEA and APAC regions expect to increase allocations by 30 basis points and 20 basis points, respectively.
The report notes that the asset class’s track record as an outperformer continues to attract capital inflows, as many investors note they are expecting attractive buying opportunities to emerge over the next two years. Specifically, “investment pacing is expected to accelerate over the coming quarters, and investors are positioning themselves to capitalize on potential distress and dislocation resulting from current market volatility,” the report notes.
Public pensions have the highest target allocation to real estate at 12.6%, while insurance companies have the lowest target allocation at 5.9% (but are expected to increase to 6.5% in 2023). And institutions with less than $50 billion in AUM continue to allocate a larger percentage of their portfolios to real estate than those with an AUM of greater than $50 billion.
Twenty-eight percent of institutions report that they expect to increase target allocations over the next year, down from 33% in the prior year.
Source: GlobeSt.