Nearly three-quarters of institutional investors plan to expand their real estate portfolios over the next five years according to new research carried out by asset management company Patrizia.

The German real estate firm garnered responses from 222 clients and 72% said they were planning to increase real estate investments before 2026 with a focus on portfolio diversification and 16% indicated they intended to see growth by more than 10% over the next five years while 56% are targeting up to 10%.

The survey also showed that during the Covid-19 pandemic, real estate proved to be a stable investment with 56% reporting no adjustment to their portfolios. Of those who did reallocate in response to the crisis, most adjusted exposure across real estate sectors (19%), while others shifted towards lower risk strategies (8%), or deferred investments (17%), increased their liquidity (6%) and 14% turned to equities, bonds, other asset classes or infrastructure.

Anne Kavanagh, Management Board Member and Chief Investment Officer at PATRIZIA, said: “Institutional investors are increasing their investments in real estate and they look for broader diversification across real estate sectors to ensure attractive risk-adjusted returns in the future.

“In the current ‘lower for longer’ interest rate environment, cash returns from real estate have proved to be an invaluable source of attractive and stable returns.

“Overall, real estate investments were remarkably resilient in the Covid pandemic and delivered solid returns. At the same time, the pandemic underlined the need for active management of property assets and tailored sector strategies to effectively reduce risks and drive value.”

The trend towards broader diversification is reflected in how investors plan to adjust their portfolios over the next five years. About every second respondent plans to grow their infrastructure exposure and 42% intend to invest in new asset classes, while 43% will further diversify their portfolios across different real estate segments, investment strategies (12%) or international markets (12%).