GLOBAL - Real estate holdings by institutional investors have increased slightly to $236bn (€165.8bn) in 2010 - compared with $198bn the year before - but most of these investors are reluctant to increase their allocation to this asset class, according to a new survey.
The Pension Real Estate Association (PREA), which includes public and corporate pension funds worldwide, found that real estate holdings represented 9.8% of the investor total assets in 2010, against 9.4% in 2009.
This was mainly due to the increase in total assets for plan sponsors, which went up to $2.4trn - an increase of 14% from year-end 2009 - as equity values continued to rise.
However, the survey also shows that one-quarter of respondents had a target allocation to real estate of 10% or more in 2010, slightly down from the year before.
In 2009, almost one-third of respondents had an allocation of 10% or more to real estate.
As part of their investment strategy, 25% expect an increase in their real estate allocation this year, while 79.2% are not planning to make any changes, due to the market volatility.
PREA said that, in recent years, investors have been more active in other asset classes more easily allocated as 'other', rather than major asset categories such as stocks, bonds or real estate.
This has caused the allocation to the other assets class to increase significantly, it said.
In terms of investment strategy, the report found that investors are fleeing riskier real estate investments in favour of core, considered a safer haven from the volatility of value-added and opportunistic investments.
In total, $74bn was allocated to core real estate assets in 2010, against $62.2bn the year before.
However, $26.9bn was allocated to value-added assets, while $41.3bn was allocated to opportunistic assets.
As for the property type, offices remain the most attractive assets for pension plans, with 27.6% of allocations going toward this type of property.