Capital on the move: How optimistic investors are targeting direct commercial real estate in 2026

Optimism abound

87% of respondents by AUM plan to increase investment in direct CRE in 2026. 62% expect to be net buyers and only 12% expect to be net sellers, potentially creating a structural imbalance that could tilt certain markets towards a seller’s advantage.

Liquidity is back, but uneven

The headline signals strength, but supply constraints and execution risk – the challenges of sourcing, competing, structuring and closing deals - will shape outcomes. Weighted by AUM, North American investors account for almost half of the capital planning to increase investment. More than 90% of respondents set to increase investment, weighted by AUM, aim to target Europe, including the UK.

Investment Managers and institutional capital more likely to increase investment

Investment managers and institutions are more evident among investors planning to increase allocations in 2026 than in the overall survey.

Of those signalling an increase, 53% are investment managers by AUM. Institutional capital also carries greater weight by AUM, accounting for 24% of planned increases versus 21% in the full survey. This reinforces the likelihood of competitive bidding for Core and Core Plus assets, given institutional preference for defensive strategies and the scale of capital they control.

Offices and industrial/logistics are top of the hit-list for 2026

Just under two-thirds of investors planning to increase allocations in 2026 intend to target both industrial/logistics and offices, ranking them as joint top sectors. However, this reflects overall targeting rather than a guarantee that these sectors are where incremental capital will be deployed.

Strategies reflect tactical behaviour

Investors in the survey planning to increase investment favour Core Plus (81% by number and 88% weighted by AUM of investors set to increase) and Value Add (75% by number and 86% weighted by AUM of investors set to increase). However just under two thirds of investors looking to increase investment by number and just over three-quarters of investors looking to increase investment by AUM plan to target Core, signalling renewed appetite here as well.

Smaller investors lead the charge – direct CRE allocations also set to rise for over 40% of mixed asset investors.

• 42% of respondents who are not pure direct CRE investors by number plan to increase allocations in 2026 and 29% when weighted by AUM.
• This indicates that optimism is concentrated among smaller investors, although institutional (traditional Core investors) mixed-asset investors dominate by AUM.
• For those which are not pure direct CRE investors, mean allocations to direct real estate are 54%.

How do these allocations compare?

Survey respondents exhibit significantly higher allocations to direct CRE than industry benchmarks suggest. According to PERE data, allocations for broad-based mixed-asset investors have historically hovered between 7.5% and 9.5% of total AUM, with target allocations typically in the 9–10% range.

Recent PERE analysis by fund vintage indicates that actual allocations to direct CRE have declined as a percentage of total AUM in recent years, but the long-term linear trend indicates that both target and actual allocations are increasing, albeit at difference paces.

The gap between target allocations and actual allocations is also narrowing, suggesting increased alignment between investor intent and execution. This also means that even if target allocations stabilise, there is likely to be latent capacity for increased demand for direct CRE in the coming years from a higher proportion of target allocations being realised through actual allocation.