Institutions Hold Real Estate Allocations at 10.7% as Under-Allocation Hits Three-Year High

Gap between target and actual allocations widened by 30 basis points in 2026 as strong equity performance left 54% of institutions under-allocated.

By the Family Office Real Estate Daily Desk·Thursday, November 12, 2026·1 min read

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What are institutional real estate allocation targets and under-allocation levels in 2026?

Institutional target allocations to real estate held steady at 10.7% in 2026, according to the 14th annual Institutional Real Estate Allocations Monitor published by Hodes Weill and Cornell University's Baker Program in Real Estate. The share of institutions reporting under-allocation rose to 54%, up from 40% in 2025, the highest level since 2021. The gap between target and actual allocations widened by 30 basis points year over year, driven by strong public equity performance.

Key facts

Institutional target allocations to real estate held steady at 10.7% in 2026, according to the 14th annual Institutional Real Estate Allocations Monitor published by Hodes Weill, a Chatham Financial Company, and Cornell University's Baker Program in Real Estate.
Approximately 54% of institutions reported being under-allocated in 2026, up from 40% in 2025, representing the highest reported under-allocation since 2021, according to the Institutional Real Estate Allocations Monitor.
The gap between target allocations and actual allocations widened by 30 basis points year over year, according to the Institutional Real Estate Allocations Monitor.
Institutions expect to increase target allocations by 10 basis points to 10.8% in 2027, according to the Institutional Real Estate Allocations Monitor.
The Conviction Index, measuring institutions' view of real estate as an investment opportunity on a scale of one to ten, declined to 6.0 in 2026 from 6.4 in 2025, matching its five-year low, according to the Institutional Real Estate Allocations Monitor.
Douglas Weill, senior managing director at Hodes Weill, said renewed interest rate volatility and geopolitical uncertainty delayed the recovery many investors anticipated coming into 2026.

Institutions Hold Real Estate Allocations at 10.7% as Under-Allocation Hits Three-Year High — Image: editorial illustration · Story sourced from Connect CRE

Institutional target allocations to real estate held steady at 10.7% in 2026, unchanged from the prior year following the survey's first decline in 2025, according to the 14th annual Institutional Real Estate Allocations Monitor published by Hodes Weill and Cornell University's Baker Program in Real Estate. Institutions expect to increase target allocations by 10 basis points to 10.8% in 2027.

After rising more than 20% between 2013 and 2022, target allocations have remained relatively flat since 2021. Approximately 54% of institutions reported being under-allocated in 2026, up from 40% in 2025, representing the highest reported under-allocation since 2021. The gap between target allocations and actual allocations widened by 30 basis points year over year.

The survey's Conviction Index, which measures institutions' view of real estate as an investment opportunity from a risk-return standpoint on a scale of one to 10, declined to 6.0 from 6.4 in 2025, matching its five-year low.

The widening gap between actual and target allocations reflects strong public equity performance and implies meaningful capacity for new investment, Hodes Weill said. Institutions have held their target allocations steady through a period that tested confidence, as renewed interest rate volatility and geopolitical uncertainty delayed the recovery many investors anticipated coming into the year, the firm said.

Many institutions are positioning to invest selectively at reset valuations, and as distributions recover, this allocation headroom could support a renewed pace of investment, Douglas Weill, senior managing director at Hodes Weill, said.

The Deployment Angle

Family Office Real Estate Daily Desk · our analysis, not the source's

The 140-basis-point under-allocation among more than half of institutional respondents translates to dry powder competing for the same reset opportunities family offices are underwriting. That argues for co-investment structures that pair family office capital with institutional scale rather than direct acquisitions where bidding will intensify as distributions normalise.

The 40-basis-point decline in the Conviction Index signals pricing resistance. Institutions are waiting for further valuation discovery, which means sponsors seeking equity for transitional assets will need to show demonstrable stabilisation milestones or accept lower initial valuations. Family offices writing cheques into transitional deals today should price in slower institutional follow-on capital and longer hold periods than pro formas assume.

The 10-basis-point projected increase in target allocations for 2027 is marginal. It suggests institutions will deploy selectively within existing mandates rather than broaden allocations across property types or risk profiles. Family offices overweighting opportunistic strategies should pressure-test whether their sponsors can deliver exits to institutional buyers at the basis those buyers now require, or whether realisations will depend on one-off trade sales to other private buyers.

Questions this story answers

01What are institutional target allocations to real estate in 2026?

02Why are so many institutions under-allocated to real estate right now?

Douglas Weill, senior managing director at Hodes Weill, said the widening gap between actual and target allocations reflects strong public equity performance. Approximately 54% of institutions reported being under-allocated in 2026, up from 40% in 2025, the highest level since 2021, according to the Institutional Real Estate Allocations Monitor.

03How much has the gap between target and actual real estate allocations widened?

The gap between target allocations and actual allocations widened by 30 basis points year over year in 2026, according to the 14th annual Institutional Real Estate Allocations Monitor published by Hodes Weill and Cornell University's Baker Program in Real Estate.

04How confident are institutions in real estate as an investment opportunity in 2026?

The Conviction Index, which measures institutions' view of real estate as an investment opportunity from a risk-return standpoint on a scale of one to ten, declined to 6.0 in 2026 from 6.4 in 2025, matching its five-year low, according to the Institutional Real Estate Allocations Monitor.

05Are institutions likely to deploy more capital into real estate given the current under-allocation?

Douglas Weill, senior managing director at Hodes Weill, said many institutions are positioning to invest selectively at reset valuations, and that as distributions recover, the current allocation headroom could support a renewed pace of investment. Weill also said renewed interest rate volatility and geopolitical uncertainty delayed the recovery many investors anticipated coming into 2026.

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