Institutional investors are pressing pause on some commercial real estate acquisitions, new survey data shows.

Institutions cut their target allocations for real estate for 2025 compared to the prior year for the first time in the 13-year history of the Institutional Real Estate Allocations Monitor. But the 10-basis-point reduction to 10.7% of allocations in 2025 is expected to be short-lived, with forecasts for 2026 bouncing back to prior levels.

The survey, published Tuesday by Hodes Weill & Associates and Cornell University, included 166 institutions across 26 countries with $1.4T in total real estate assets. This year’s results showed that market uncertainty and higher returns from other sectors have pulled institutional capital from commercial real estate, the survey's authors said.

The modest dip in target allocations follows three years of steady demand at 10.8%, which was preceded by growth that pushed CRE allocation percentages up by more than 20% between 2013 and 2022.

The survey’s authors predicted the dip in demand from global investment this year, in part because sophisticated buyers are looking to time the market to maximize investments.

“While institutions maintain strong conviction in the long-term attractiveness of real estate, many have approached re-entry to the market cautiously,” the survey’s authors wrote, adding that the momentum that had been building in the beginning of 2025 was sapped by President Donald Trump’s “Liberation Day” tariff announcements and the trade war that came with them.

The declining target allocations are primarily being reported from institutions in the Asia Pacific region, where they slipped by more than 100 basis points year-over-year. Firms in the Americas saw a 40-basis-point decline, while allocation mixes were unchanged in Europe and the Middle East.

The rebound forecast for 2026 is expected to be driven by increased acquisitions from European and Middle Eastern institutions as firms in the Americas and Asia hold allocations flat.

Survey respondents included public and private pension funds, endowments and foundations, and insurance firms, along with a small contingent of sovereign wealth funds. Institutions headquartered in the Americas represented 61% of respondents.

Global portfolios averaged 1.4% returns in 2024, a modest gain and a reversal of the 1.4% loss reported in 2023. Despite largely underperforming, sentiment is trending in a positive direction as concerns around inflation and interest rates, along with geopolitical risks, are diminishing.

“While we’re seeing the first decline in target allocations since our survey began, this is consistent with the expected tactical pause we reported last year rather than a strategic shift away from real estate,” Douglas Weill, managing partner at Hodes Weill & Associates, said in a statement.

The survey found that the gap between target and actual allocations is growing. The average institution is 90 basis points off its target allocation for CRE, a mismatch that is the result of strong gains in other sectors outshining modest real estate growth and limited new capital deployment in the sector.

Fears that nationalist rhetoric from the White House would stifle cross-border investment into the U.S. haven’t come to fruition, the survey found.

American institutions reported an increase in cross-border investment activity, and 92% of all firms surveyed expected to add assets in the region in 2025, a four-year high.

Despite a push among everyday citizens to buy local in the face of a hostile trading partner, Canadian institutions increased their cross-border investment activity by nearly 20% year-over-year, the survey found.