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Global Fund Managers Cut CRE Allocations to 15-Year Low
Global fund managers have slashed their real estate allocations to a 15-year low, the Financial Times reported. A net 28% of managers were underweight the real estate sector in May, down 13 percentage points from April, according to Bank of America’s latest global fund manager survey.
The commercial real estate market has undergone a painful shift away from ultra-low interest rates, compounded by uncertainty over the future of offices following the COVID-19 pandemic, reported the FT. Recent concerns that borrowing costs in big economies are set to remain higher for longer have weighed further on the sector.
“A change in interest rate expectations is a contributing factor to this change in sentiment, as fundamentally nothing has changed since March other than the inflation story in the U.S.,” Oliver Salmon, a director in Savills’ world research team, told the FT. “Interest rate declines are needed for market sentiment to improve.”
The BofA survey of 245 money managers with a combined $642 billion in assets under management suggested that allocators are moving away from real estate and into consumer stocks, bonds and cash. The global CRE sector lost investors 4.1% in 2023, the lowest annual return since 2009, according to MSCI’s Global Annual Property index.
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