An annual global survey of institutional real estate investors has found that allocations to real estate are beginning to align more closely with target levels globally.
The Investment Intentions Survey, carried out by three regional real estate associations ANREV, INREV and PREA found that the average current allocation to real estate globally stands at 8.7%, just below the average target of 9.0%.
European investors, who had been overallocated for the past two years, now say their average allocation matches their average target of 9.4%. North American investors continue to show the highest current allocation at 10.4%, and are still some 80bps under their average target. Asia-Pacific investors remain structurally underallocated, but the gap narrowed significantly compared to the average 120-200bps recorded in recent years.
Spain joins top three European investment destinations
For the first time in the survey’s history, Spain has entered the top three most preferred destinations in Europe, joining the UK and Germany. Spain’s rise is attributed to strong GDP growth, low employment and robust demand in the living sector. France, a historical favourite, fell from the top three rankings, for the first time according to the survey.
Appetite for high-risk strategies remains strong in Europe
The trend toward value-added strategies observed in recent years continues to shape investor preferences in Europe in 2025. The real estate associations found that approximately 62% of investors planning to allocate capital in Europe favour high risk strategies, with value-added investments being preferred by 47%.
At the same time, there has been a significant uptick in interest in core strategies, with 38% of investors now favouring this approach, up from 21% in 2024. This reflects caution amid economic and geopolitical uncertainties. The trend is evident among European and North American investors, with 48% and over 43%, respectively, showing a preference for core investments. Asia-Pacific investors continue to prefer high risk strategies when investing in Europe, to achieve diversification and capitalise on favourable pricing conditions, the survey highlighted.
Australia and Japan stand as favoured locations for investment
The top three city/sector combinations for 2025 investments continue to be dominated by the institutional markets of Australia and Japan. Tokyo residential, Sydney residential, and Sydney industrial/ logistics are tied for the top position, with each favoured by 70% of respondents as a preferred city/sector combination for Asia-Pacific investment in 2025. This ranking further emphasises the residential sector’s prominence, with two out of the top three combinations representing residential investments, solidifying its status as the most preferred sector for the year.
Residential and logistics sectors lead preferences
The survey found that residential real estate continues to dominate sector preferences in Europe, favoured by 89% of investors, maintaining its top position for the second consecutive year. Among European investors, the preference for residential is unanimous at 100%. Industrial/logistics follows closely at 85% by all investors in Europe, driven by continued growth in e-commerce and supply chain optimisation.
Student accommodation climbed to third place, securing 67% of preferences – its highest ranking since the survey’s inception. Meanwhile, the office sector experienced a record low preference at 48%, a significant drop from its five-year average of 64%, reflecting evolving work patterns and market challenges.
Operating platforms gain favour
Included in the survey for the first time this year, operating platforms have been identified as the most preferred access route for European real estate investments, in alignment with residential sector growth. Debt funds continue to show strong net positive sentiment, marking a 34% increase, though the interest is more subdued compared to 2024’s 81% net growth.
Multi-manager investment solutions have also seen a surge in positive sentiment, with investors valuing their tailored propositions and agility in accessing diverse markets and sectors.
Sustainability remains a key focus
The survey found that 56% of investors globally have set net zero targets. However, approaches vary significantly: 22% are aiming for aggressive 2020-2030 timelines, while 61% are targeting net zero post-2040. For these respondents, economic uncertainties and high implementation costs are likely to be the key barriers.
European investors lead the charge in embedding ESG considerations, driven by evolving EU regulations, while North American investors generally remain less focused on these criteria.
Iryna Pylypchuk, INREV’s director of research and market information, said: “The 2025 Investment Intentions Survey demonstrates only a slight underallocation to real estate globally. With European investors’ portfolios broadly rebalanced, this is a positive shift relative to the previous two years when the denominator effect led to overallocations. However, 2025 may also stand as a placeholder year for many investors.
“Political and economic uncertainties in many markets prompt to recalibrate strategies and assess the long-term implications of evolving market dynamics while focusing on tactical disposals in real estate and broader multi-asset portfolios. That said, with strong investor focus on residential and industrial/logistics sectors and the emergence of operating platforms as a favoured access route into Europe, the year ahead presents compelling opportunities for those seeking strategic expansion.”
Charles Haase, ANREV’s chief executive, added: “The 2025 Investment Intentions Survey reflects institutional investors’ increasing inclination toward value-added strategies to enhance returns. It is also unsurprising that institutional investors continue to favour the well-established and stable markets of Australia and Japan.
“As we navigate a rapidly evolving global landscape characterised by macroeconomic and geopolitical challenges, non-listed real estate remains a highly relevant and resilient component of institutional portfolios.”
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