Institutions hold real estate targets at 10.7% as conviction slips

Institutional target allocations to real estate held at 10.7% in 2026, after the survey's first decline in 2025, according to the 14th annual Institutional Real Estate Allocations Monitor from Hodes Weill and Cornell's Baker Program.

Respondents expect to add 10 basis points to their targets for 2027, taking the average to 10.8%. Targets climbed more than 20% between 2013 and 2022 and have stayed roughly level since 2021.

For a pension or endowment board setting 2027 pacing, an under-allocated plan now sits with the majority rather than the minority. The shortfall to target is capital still to be committed.

About 54% of institutions reported being under-allocated, up from 40% in 2025 and the highest share since 2021, while the distance between target and actual allocations grew 30 basis points over the year.

The survey's Conviction Index, which scores institutions' view of real estate as a risk-return opportunity from one to 10, fell to 6.0 from 6.4 in 2025, matching its five-year low.

Douglas Weill, senior managing director at Hodes Weill, a Chatham Financial company, said renewed interest rate volatility and geopolitical uncertainty "delayed the recovery many investors anticipated coming into the year." "The widening gap between actual and target allocations reflects strong public equity performance and implies meaningful capacity for new investment," he added. He said that as distributions recover, that headroom could support a renewed pace of investment.