Already a few major institutions have increased their real asset allocations to at least 25% of their total assets, including the Dallas Police & Fire Pension System, the Ontario Teachers, the Austin Police Retirement System and even venerable Yale University.

Joseph Azelby and Michael Hudgins are two of JPM's brightest lights, and their new report is actually compelling stuff. In it, they argue that the real estate industry is on the cusp of a "rare structural shift" whereby pension funds and other institutional investors are seeking alternatives to stocks and bonds, and real assets are beginning to step into the limelight.

There is no doubt that we have heard this all before, right? And even Azelby and Hudgins admit that the trend is in its early stages. The proof is in the pudding, though, and so far, many institutions continue to feel the lingering effects of dampened commercial real estate performance from the most recent economic rodeo.

My big bellwether, the California Public Employees' Retirement System, or CalPERS, saw only a puny 1.9% positive return on its real assets portfolio, worth $21.8 billion, in the first quarter of 2012. The big fund's real assets bucket is comprised mostly of pure "real estate" with $18.9 billion in market value, followed by forest land with $2.1 billion and infrastructure with $800 million.

On a more global scale, Middle Eastern sovereign wealth funds have increased their real estate allocations by 23% in the first half of 2012, according to a study by Invesco. In the ever-so-entertaining Euro Zone, where institutions face their stiffest test in balancing risk versus reward, consultancy Mercer recently found that most of the 1,200 European pension funds it surveyed have trimmed their allocations to stocks and increased their exposure to alternatives. And that trend looks set to continue.

There is even interest, here at home and abroad, for farmland, of all things. Institutions in both Canada and Europe plowed some $2 billion into a company formed by TIAA-CREF that will invest in farmland in the US, Australia and Brazil.

To be sure, this is one to watch, since TIAA-CREF has about $487 billion in total assets under management. Its new Global Agriculture firm will invest in land farmed for cotton, soybeans, apples and almonds—who knew crops could be so cool?

Other big funds are ramping up their real estate allocations. The City and County of San Francisco Employees' Retirement System is pumping $450 million into new real estate investments over the next year, with about $400 billion of that sum targeting non-core investment strategies. At the end of 2011, the fund held a real estate portfolio valued at $1.5 billion, or 10.3% of its total assets.

With 10% allocations to real estate/real assets still being the norm, the going-mainstream trend is obviously in its infancy, but the "alternative" is beginning to look more essential to many institutions. Real estate was the top performer for the New York State Common Retirement Fund in the past year, racking up a 17.6% return, and yet, it represented a measly 6.1% of the fund's total asset allocation. It's highly likely that situation will receive some much-needed attention.