Global Asset allocation boosts industrial, raising concentration risk

Based on our analysis, most investors are likely to allocate heavily towards industrial and away from offices over the next five years. But whether they are seeking to maximise absolute or risk-adjusted returns will have a key influence over whether they allocate capital to the retail and residential sectors.

What you will learn:

• The absolute return approach to portfolio construction prioritises total returns by allocating capital to sectors with strong growth potential. This favours higher exposure to industrial and residential properties, while reducing portfolio allocation to the retail and office sectors.
• Investors seeking to maximise risk-adjusted return could, based our forecasts, consider concentrating their allocation on industrial properties, even after accounting for risks like climate transition.
• With both approaches favouring the industrial sector, we expect increased competition for high-quality industrial assets, particularly in logistics hubs and near major urban centres.
• Under both approaches, the office sector looks set for a steep decline in allocations, reflecting uncertainty about long-term demand due to the rise of remote work and hybrid models. This makes offices a high-risk bet for investors.