Real estate is expected to remain an attractive asset class for institutional investors in 2005, but it will not be for the timid.
Insiders say investors will need to be nimble and focus on risk management.
"In commercial real estate the market is clearly at a point of maturity and most institutions have mature real estate portfolios," said Ken Riggs, chief executive officer and managing principal of Real Estate Research Corp., Chicago.
This maturity means that institutional investors will need to optimize the value that they have in their portfolios because there will continue to be an abundance of capital chasing fewer opportunities, Mr. Riggs said.
"Last year we spoke about the importance of patience and creativity to deal with the capital out there," said Jacques Gordon, global strategist for LaSalle Investment Management, Chicago. "In 2005 we are adding ‘nimble,' knowing in advance what your strategy is so when the right deal comes along you can move quickly."
None of the experts interviewed see a reduction in the massive amount of capital flowing into real estate, but they said if institutional investors want to garner the best returns, they are going to have to take on more risk in general.