The pension fund’s long-term evolution to defined contribution (DC) plans from defined benefit (DB) plans has profound implications for the commercial real estate market. DB plans, where employers guarantee fixed retirement income to employees, have been ceding ground to DC plans since the 1970s. Under DC plans, employees assume responsibility for making contributions and bear the risk of meeting their income replacement goals for retirement. With $3.8 trillion of total assets under management, they have already outstripped DB plans, and DC plans are expected to grow to $7.7 trillion by 2020, according to Casey Quirk & Associates.

Despite the growth of DC plans, they invest minimally in commercial real estate, while DB plans on average allocate 6.6 percent of their assets to commercial real estate.

The challenge for the private commercial rea