Institutional investors are being more cautious in their approach to real estate investment, according to a new report.

Research carried out by Cornell University and consultancy Hodes Weill found that 60% of global investors are less convinced of the investment case for real estate than they were a year ago.

The 2014 Institutional Real Estate Allocations Monitor, a survey of 231 – predominantly US – institutions revealed a “decline in conviction” over the past year, with interest “moderating”.

“At five years into a market recovery, this shift in sentiment is not surprising,” the report said, noting that EMEA investors remained the most optimistic.

Rising interest rates, slow economic growth, new supply and too much capital pushing valuations ahead of fundamentals were all reasons for the reduced appetite.

Managers offering non-core strategies could stand to benefit if the study’s findings prove to be true. The 40-question survey found that the value-add and opportunistic strategies are more attractive than core ones.

Cross-border investment was shown to be on the increase, with emerging markets also seeing a year-on-year rise in investor interest.

Hodes Weill said 66% of institutions are actively pursuing value-add and/or opportunistic strategies, compared with 52% for core strategies.

Allocations towards higher return strategies are also up, with 71% of institutions expecting to invest in private funds – up from 58% in 2013.

Around 70% of institutions have 100% of their investments managed by external parties. “In addition, despite much discussion to the contrary about institutions internalising portfolio management functions, institutions are three times more likely to allocate new capital to third-party managers than to in-house management,” the report said.

The percentage of institutions actively investing in real estate fell from 81% in 2013 to 73% this year. The report also found that 26% of institutions expect to invest more capital in 2014 – down from 39% in 2013.

Institutions have indicated an intention to increase their average target allocation by 24 basis points to 9.62% over the next 12 months. The average target allocation to real estate stands at 9.38%, up 49bps from 2013.

Institutional portfolios are 8.49% invested in real estate, or approximately 88bps under-invested relative to target allocations. The figure is in line with 2013 target allocations.

The survey, conducted between mid-May and early September, targeted primary allocators to investments, such as pension plans, insurance companies, sovereign wealth funds, endowments and foundations.