NEW YORK (Reuters) - Global institutional investors in 2017 targeted real estate for more than 10 percent of their portfolio for the first time in a major milestone but confidence in the asset is waning and will likely continue in the short term, a survey showed on Thursday.

Surpassing 10 percent is a seminal moment for the asset class even though real estate’s average return has decelerated over the past year, according to the fifth annual Institutional Real Estate Allocations Monitor.

The milestone is an important endorsement of real estate as an asset class, said Doug Weill, a managing partner at advisory firm Hodes Weill & Associates, which conducted the survey with Cornell University’s Baker Program in Real Estate.

Over the past 30 years real estate has moved from being entrepreneurial to an institutional asset class, he said.

“It’s not quite as high a target allocation as other asset classes but it’s clearly growing,” Weill said.

The average target allocation to real estate rose to 10.1 percent last year from 9.9 percent in 2016 and was an increase of 1.2 percentage points since 2013, when the survey began.

About 44 percent of institutions now target an allocation of more than 10 percent, up from 27 percent in 2016 and 18 percent in 2015, the survey said.

Worldwide, real estate generated an average annual return of 8.6 percent last year, down from 11.0 percent in 2015, a reason investor conviction in the asset has declined significantly.

The survey’s “Conviction Index,” which measures an institution’s view of real estate as an investment opportunity on a risk-return basis, slid to 4.9 last year from 5.4 in 2016.

Market sentiment has declined over the past 12 months from “moderately optimistic” to “slightly pessimistic,” it said.

Investors cited concerns over too much capital pushing valuations ahead of fundamentals, the risk of rising interest rates, global capital market volatility and geopolitical risks.

This year, 244 institutional investors took part in the survey conducted from May to September. They hailed from 28 countries and represented institutions with about $1.1 trillion in real estate assets.

(This story corrects spelling of Associates in advisory firm’s name in third paragraph)