Real Estate Alert: Pension Pledges ‘Bouncing Along the Bottom’

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Reprinted from Green Street's Real Estate Alert:

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Public pension pledges to commercial real estate vehicles in the first quarter were down just slightly from a year prior, a potential green shoot for the fundraising market.

Some $10.54 billion was committed to funds and separate accounts from January through March, a 3% dip from $10.87 billion in the same period of 2023, according to Ferguson Partners. To be sure, the pledged dollars are the lowest first-quarter total since 2020 — and a fraction of the record of $17.57 billion hit in the first three months of 2022.

But after 2023, which was the worst year in a decade, the tally could be a sign that pensions are poised to increase commitments sooner rather than later.

“It’s a continuation of the market conditions and the challenges seen at the back half of 2023,” Ferguson director Scott Mc-Intosh said. “Had it fallen 20%, that would have been alarming because [it would add to last year’s] massive drop-off. … The fact that it’s bouncing along the bottom reflects the capital markets and the persistent challenges there.”

McIntosh cautioned against reading too much into the first quarter figures, given that public reporting by CalPERS — typically in the first and third quarters — can skew reporting. Still, he views the data as another sign that pensions remain committed to commercial real estate, despite the downturn in the sector.

“You may see changes on the margin, in terms of the allocations, but real estate as an asset class is a core element,” McIntosh added.

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