Many of the world’s largest institutional investors are moving closer to their portfolio allocations for real estate assets, which may slow the pace of their property acquisitions, according to a new report.
Survey data and interviews from IPE Real Assets show that 53 percent of top institutional investors expect to be net buyers of real estate assets in 2019 and 32 percent neither net sellers nor net buyers.
“There is no necessity to either actively increase or reduce real estate exposure,” said Rutger van der Lubbe, head of global real estate investment strategy at APG, which manages investments for pension funds in the Netherlands. “Our clients’ real estate exposures are currently within their targeted weightings.”
Johan Temse, real estate investment manager at Swedish pension fund AP1, says the fund is within its target allocation of 13 to 14 percent for real estate, so its property acquisitions are “limited” and “selective.”
“We’ve been very active through 2015 to 2018 but are looking at a slightly active year for real estate equity in 2019,” said Mikko Antila, head of international real estate at Finnish pension insurer Ilmarinen. “We anticipate to be quite active in real estate debt, however.”
The largest pension fund manager in Germany, Bayerische Versorgungskammer (BVK), expects to actively push its portfolio allocation to real estate above 20 percent. The regulatory limit in Germany is 25 percent. “While we are today at approximately 21 percent, we’re still having room to grow,” said Rainer Komenda, head of real estate funds at BVK.
But Komenda also said BVK this year will be “investing a little bit slower and continuing to be very selective,” with a new focus on “value creation themes.”
Allianz Real Estate, which handles the property investments by the Allianz group of insurance companies, also is shifting its attention to the value-add side of the real estate market and away from core assets, its historical focus.
The biggest institutional investors in real estate assets, as ranked by IPE, were Allianz Real Estate ($72.4 billion), China Investment Corporation ($52.9 billion), Abu Dhabi Investment Authority ($51.2 billion), APG in the Netherlands ($48.38 billion) and TIAA ($47 billion).
The average return expectations hovered around 7 percent, though Allianz generated a 10 percent return last year. It expects returns between 4 and 6 percent this year. [IRE Real Assets] – Mike Seemuth