Suggested vs. Actual Institutional Allocation to Real Estate in Europe: A Matter of Size

FAME Research Paper No. 149

26 Pages Posted: 8 Aug 2005

See all articles by Martin Hoesli

Martin Hoesli

University of Geneva - Geneva School of Economics and Management (GSEM); Swiss Finance Institute; University of Aberdeen - Business School

Jon Lekander

Aberdeen Property Investors Nordic Region

Date Written: June 2005

Abstract

The allocation to real estate by institutional investors has increased in recent years and as a result the gap between suggested and actual allocations has narrowed. The increased inflow of capital to the real estate market is suggested to be a function of two factors: An increased focus on absolute return target investments amongst institutional investors and an increased target allocation to real estate. We argue that the increased target allocation is made possible mainly by the development of new investment vehicles, in particular of private real estate funds, but also of the growing integration of economic regions and of other factors such as the development of investment benchmarks. The flows needed for the actual allocation by European institutional investors to match the suggested allocation constitute at least 31% of the real estate equity universe held by owner occupiers. We estimate that seven years would be needed to reach the target allocation, but it is unlikely that sufficient investment opportunities will arise unless the willingness of owner occupiers to outsource their real estate assets increases.

Keywords: real estate allocation, market transparency, private real estate, flows

JEL Classification: R33, G23

Suggested Citation

Hoesli, Martin Edward Ralph and Lekander, Jon, Suggested vs. Actual Institutional Allocation to Real Estate in Europe: A Matter of Size (June 2005). FAME Research Paper No. 149, Available at SSRN: https://ssrn.com/abstract=770767 or http://dx.doi.org/10.2139/ssrn.770767

Martin Edward Ralph Hoesli (Contact Author)

University of Geneva - Geneva School of Economics and Management (GSEM) ( email )

40 Boulevard du Pont d'Arve
Geneva 4, Geneva 1211
Switzerland
+41 22 379 8122 (Phone)
+41 22 379 8104 (Fax)

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

University of Aberdeen - Business School ( email )

Edward Wright Building
Dunbar Street
Aberdeen, Scotland AB24 3QY
United Kingdom
+41 22 379 8122 (Phone)
+41 22 379 8104 (Fax)

Jon Lekander

Aberdeen Property Investors Nordic Region ( email )

Stockholm
Sweden

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