Geoffrey Dohrmann, founder, chairman, and CEO of Institutional Real Estate Inc. (IREI) joined the REIT Report podcast to discuss how institutional investors are navigating the changing landscape of real estate allocations amidst a prolonged period of market uncertainty.
“There’s a pricing reset going on, there's capital market stress, and there are structural demand shifts that are happening all at once,” he said.
Investors are increasingly unsure about which signals to heed, leading to a widening knowledge gap between those who understand the context of these changes and those who react purely on instinct, Dohrmann said. This moment in the market is marked by cautious capital, he said, “but curiosity is starting to come back, which is a good thing.”
Dohrmann also pointed to a “tremendous opportunity” for REITs to create joint ventures. REITs are “integrated vertical operating companies. A lot of pension funds and a lot of pension fund investment managers like to invest in joint ventures with operating companies. But the advantage a REIT has is access to both private and public capital.”
Among other key takeaways:
- Traditional asset allocation models are being abandoned in favor of a total portfolio approach which emphasizes flexibility and adaptability, allowing investors to reassess the role of real estate within their portfolios.
- Investors are now focused on the types of real estate assets they hold, rather than simply the amount.
- While institutional investors still hold significant allocations in REITs, they often use them to achieve different objectives compared to private real estate investments. He likens the choice between REITs and private investments to selecting the right tool for a job.