European Institutional Real Estate Survey 2013 - Research supported by Invesco
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
INVESTMENT & PENSIONS EUROPE
European
Institutional
Real Estate
Survey 2013
Research supported by InvescoContents
Foreword 2
Risk, returns and retrenchment 3
Austria – Sticking to what you know 8
Germany – Diversifying a real portfolio 9
Netherlands – Pension funds shift towards listed 12
Nordics: Denmark, Finland & Sweden – Northern safe havens 15
Switzerland – Home, sweet Swiss home 19
UK – No big changes for UK investors 22
© IPE International Publishers Ltd 2013. IPE European Institutional Real Estate Survey 2013 is published in association
with Investment & Pensions Europe
IPE International Publishers Ltd, Pentagon House, 52-54 Southwark Street, London SE1 1UN, UK
Tel: +44(0)20 3465 9300, Fax: +44(0)20 7403 2788, Web site: www.ipe.com, ISSN 1369-3727
Investment & Pensions Europe is published monthly by IPE International Publishers Ltd. No part of this publication may be reproduced in any form
without the prior permission of the publishers. Printed by Hastings Printing Company, Drury Lane, St Leonards-on-Sea, East Sussex TN38 9BJ, UK.
1EIRES 2013
FOREW0RD
W
e are very three most important criteria when selecting
pleased to a real estate investment manager is very much
present the in line with what we see for other major asset
first European Institu- classes: risk control, clarity of investment process
tional Real Estate Survey and performance.
conducted by IPE, cov- A greater focus on risk is a phenomenon affect-
ering 83 pension funds ing capital markets in general. One way it has
with more than €100bn manifested itself in real estate markets is through
in property invest- a marked concentration on low-risk core prop-
ments and total assets of erty investments. The survey shows that core is
€1.29trn. still king when it comes to investing in domestic
The survey offers a property markets. At Invesco, we see increasing
snapshot of the institu- interest in strategies that will invest in assets that
tional property investor sit outside today’s very narrow definition of core
market in Europe, providing insight into pension with a view to repositioning them as core proper-
funds’ requirements, allocation levels and the dif- ties through active asset management.
A
ferent types of exposure, approaches and invest-
ment strategies adopted. lthough core represents the preferred
The decision to launch a survey dedicated to strategy for investors in all global mar-
real estate reflects the growing maturity of the kets, the results reveal a greater appetite
asset class at a time when investors are increas- for higher-returning investment strategies out-
ingly attracted to stable, income-producing side their domestic markets. This includes real
investments. estate investments within Europe outside their
We would like to thank all those who took home borders. The appetite for value-added and
the time to respond to the survey questions – it opportunistic real estate strategies was particu-
is certainly no effortless task, although we do larly strong for Asia and other emerging markets.
our best to make it as easy as possible. Survey In short, the survey demonstrates that Euro-
respondents help a much wider public than just pean pension funds have a strong appetite for real
themselves in sharing their information. estate, but they have a strong focus on risk man-
A number of conclusions and themes can be agement and very selective in terms of where and
drawn from the survey findings. The most obvi- how they invest.
ous is that investors continue to see a role for We thank IPE for its work in collecting and
real estate within their multi-asset portfolios. analysing the survey data and promoting the
Allocation levels can be best described as stable. report.
The biggest grouping of respondents intends to As always, we welcome your feedback and
maintain or increase its real estate allocation by would be delighted to hear from you as to how
up to 2% over the next two years. The next largest useful you found the results and if you have any
plans to increase its weighting by 3–5%, while the suggestions for improvements.
next set of investors may decrease their exposure
by up to 2%.
It was mentioned earlier that real estate is Yves Van Langenhove
becoming an increasingly mature asset class. The Invesco Asset Management
2EIRES 2013
Risk, returns and retrenchment
Institutional investors are 1. 1.
Investment type
Investment breakdown:
type domestic
breakdown: domestic
cautious about where and how % of total invested
24
they invest – and, as their Direct real estate
allocation plans show, how much. 1.2
Indirect funds
T
68
he 2013 EIRES/IPE survey of 83 pension 85.4 Fund of funds
funds with assets under management of
€1.29trn indicates European pension funds 12.2 RE securities
are more cautious than ever about where they invest, 1.2
how they invest and with whom they invest. The cur-
rent preoccupations can be summed up as: retreat,
retrench – and keep a close eye on both managers
and assets. 2. Investment type breakdown: Europe
As a rule, domestic investment still dominates ex-domestic
2. Investment type breakdown: Europe ex-domestic
portfolios and, the closer the market is to home,
the more likely it24 is to be managed directly. Of the % of total invested
€86.038bn in domestic investments, €73.4bn is Direct real estate
invested directly by 47 institutions, compared with 51.2
€10.5bn in funds (excluding fund of funds) by 42 Indirect funds
schemes. 68
Fund of funds
One reason for this is the widespread concern
86
among institutional investors about control over 19.4 RE securities
assets (and risk). WPV, the German auditors’ pen- 27.9
sion scheme is including direct in its portfolio for the
first time a bid to mitigate what it sees as the lack of 1.5
control inherent in pooled funds.
The correlation between market proximity and ap- institutions – nine – invest directly but the average
petite for direct investment also explains the smaller, investment is significant (€1.7bn), accounting for
though still significant, gap between direct and fund an aggregate €15.4bn. In contrast, 38 pension funds
investment in non-domestic European real estate. have invested €8.4bn in indirect funds, excluding
Direct investments in non-domestic European mar- fund of funds, with an average investment of €221m.
kets account for 51.2% (€15.4bn) of the total regional Fewer than 4% of investors surveyed manage non-
allocation, compared with 27.9% (€8.4bn) for funds. European portfolios internally – most likely a reflec-
What is interesting here is that relatively few tion of limits on internal capacity for all except the
86
3.3.Investment
Investmenttype
typebreakdown:
breakdown:US
US 4.4.Investment
Investmenttype
typebreakdown:
breakdown:Asia
Asia
% of total invested
24 % of total invested
Direct real estate Direct real estate
42.6 45.1
Indirect funds Indirect funds
68
Fund of funds Fund of funds
17.6 17.3
RE securities RE securities
32.7 4.9
38.4
1.4
3EIRES 2013
5.5.Investment
Investmenttype
typebreakdown:
breakdown:other
othermarkets 9. Property type
9. Property breakdown:
type Asia
breakdown: Asia
% of total invested
24 % of total invested
Direct real estate Offices
37.3
27.4
Indirect funds Retail
68
15.8 32.3
Fund of funds Logistics
RE securities Other
23.8
46.7 0.2 16.4
6. Property type breakdown: domestic 10. Property type breakdown: other
6. Property type breakdown: domestic 10. Property type breakdown: other
% of total invested
24 % of total invested
Offices Offices
53.5
32.4
Retail Retail
22.3
68
Logistics Logistics
5.1 Other 16.6 Other
86 86
24.3
40.3 5.6
7. Property type breakdown: Europe ex-domestic largest investors. Only four of 37 pension schemes
7. Property type breakdown: Europe ex-domestic
have invested directly in US real estate, for example,
% of total invested compared with 20 investing in funds, but they have
collectively invested €10bn, compared with €4.1bn
Offices
39.2 for the fund group. When it comes to average invest-
Retail ment, the direct investors average €2.5bn compared
with €207m for funds.
Logistics Yet the appetite for overseas real estate remains
12.3 41.1 strong. Although the amount pension funds have
86 Other 86
invested domestically is triple that invested in US
7.4 real estate (€86bn compared with €23.5bn), the gap
between average investments is noticeably small
(€1.4bn domestic, €1.3bn in US real estate).
8. Property type breakdown: US This suggests a certain level of confidence on the
8. Property type breakdown: US part of investors in US real estate, even if there are
relatively few of them. (The aggregate amount, for
% of total invested
example, is smaller than the €30.1bn invested in
Offices non-domestic European real estate.) Geography cor-
33.5 relates closely with the investment style adopted by
Retail
the investors polled. Core is still king, with domestic
Logistics investments from 47 schemes accounting for 91% of
31.8
the overall regional allocation, compared with 5.5%
Other for core-plus, 2.8% for value-add and 0.7% for oppor-
86
32.2 tunistic. Yet despite continued overwhelming prefer-
ence for core in domestic markets, pension funds are
2.5 willing to move somewhat up the risk curve outside
their home region. When it comes to non-domestic
4EIRES 2013
11.11.
Strategy breakdown:
Strategy breakdown:domestic
domestic 12.12.
Strategy breakdown:
Strategy breakdown:Europe
Europeex-domestic
ex-domestic
% of total invested24 % of total invested
Core Core
91.0 79.1
0.7
Core-plus Core-plus
68
Value-add Value-add
5.9
5.5
Opportunistic Opportunistic
11.3
2.8
3.7
European markets, desire for returns is driving a 13. Strategy breakdown: US
slight shift, with value-add investments making up 13. Strategy breakdown: US
11.3% of the total. Likewise investments in the US
% of total invested
market, where core24 accounts for 76% and value-add
15.7%, and to a greater degree Asia, where core ac- Core
76.0
counts for 61.2% and value-add 26.5%. Core-plus
68
LIMITS ON LISTED Value-add
4.7
Listed real estate86 has limited appeal, with most in- 86
vestors who use it to access property markets doing Opportunistic
15.7
so primarily for reasons of diversification. Listed
accounts for 19.4% of the non-domestic European 3.6
regional total, compared with indirect funds’ 27.9%,
and the average investment in domestic listed real
estate is €206m, against a total value of listed domes- 14.14. Strategy
Strategy breakdown:Asia
breakdown: Asia
tic investments of €1bn.
24 % of total invested
The size of the scheme is a factor in its appetite for
listed. Dutch pension fund manager APG, for example, Core
61.2
splits its real estate portfolio into non-listed and liquid- Core-plus
ity-providing listed. German 68 pension scheme BVK like-
wise plans to invest at least part of its €7.5bn real estate Value-add
portfolio in real estate investment trusts (REITs) to 9.3
86 Opportunistic
diversify risk and increase liquidity, as well as to access
otherwise unavailable niche asset sub-classes. 26.5 3.0
Not least because of the US’s significant REIT
market, US listed has proven to have greater traction
among a small number (five) of European pension
funds. The average investment in US listed is €1.8bn, 15.15.
Strategy breakdown:
Strategy breakdown:other
othermarkets
with a total value of €9bn. The Dutch pension fund
manager PGGM, for 24example, has allocated 39% of its % of total invested
real estate portfolio to North American markets in a Core
quest for liquidity since the US makes up around half 53.5
of the listed market. Core-plus
Asian listed has yet more 68 traction – and marginally
Value-add
more investors among those surveyed. Compared
with indirect funds, it has fewer investors (seven, 86
16.6 Opportunistic
compared with 13) but still more than the four pen- 24.3
sion schemes investing directly. Yet the aggregate 5.6
value of listed investments, at €3.1bn, is significantly
higher than that for funds (€1.7bn), though signifi-
cantly below direct investments (€4.4bn).
5EIRES 2013
MANAGERS AND CONSULTANTS 16. How is your real estate managed?
Control remains a driver for significant numbers
of pension funds across Europe, partly driven by
% of total invested, 73 respondents
regulation – in Germany and the Netherlands, for
Domestic: internally managed 37.48
example – and characterised by close scrutiny of both
Domestic: externally managed
assets and the external managers hired to manage 32.77
them. Europe ex-domestic: internally mgd 3.53
But what makes a good manager? The number of Europe ex-domestic: externally mgd 13.71
factors identified as important or very important US: internally managed 0.84
on a scale of 1–5 indicates what a complex business US: externally managed 5.44
choosing a manager can be. Asia: internally managed 0.27
At least 50% of 72 respondents identified perfor- Asia: externally managed 2.44
mance, clarity of investment process and risk control Other: internally managed 2.05
as priority criteria in the selection of new managers. Other: externally managed 1.47
Fee levels and transparency continue to exercise
investors. More than 40% of respondents identified
fees as ‘very significant’; and 44% prioritised align- markets with a correlation between unfamiliarity of
ment of interests, a related criterion for manager sel the market and the likelihood the scheme will pay
ection. Those paying performance-related fees alone both kinds of fees. In non-domestic European mar-
are in a minority. Most investors in domestic vehicles kets, for example, 58% of schemes pay both, but that
(36) pay fixed fees, with a minority (21) paying both percentage increases to 67% for the US, 68% for Asia
fixed and performance fees. and 74% for other markets.
The pattern is reversed outside schemes’ domestic Fund investment is a consultant-mediated mar-
17. When selecting an external real estate investment manager, how significant is each criterion shown
below to your organisation?
Not at all significant Very significant
% of 72 respondents to question
1 2 3 4 5
Clarity of investment process
Client service
Corporate governance
Financial strength of external manager
Investment management fees: level of fees
Investment management fees: transparency of fees
Performance fees
Alignment of interests
Performance
Quality of reporting
Reputation of asset manager (brand)
Risk control
Stability of investment team
Understanding of your organisation’s goals and needs
SRI/ESG credentials
Other criteria
6EIRES 2013
18. Do you currently compensate an external 19. Have you employed an external investment
investment manager with fixed or performance- consultant
20. Do you currently compensate an external investment manager21.
during
Have you
with
theanpast
employed three
external years? consultant
investment
related
fixed orfees, or both?
performance-related fees, or both? during the past three years?
% of respondents to question for each region % of respondents to question for each region
Fixed fees Direct real estate
Performance-related fees Indirect funds
Both 73.7 Fund of funds
67.9 Real estate securities
66.7
61.0 78.6
58.0 75.0
60.0 60.0
58.3
35.6 36.0
30.0
28.6
41.7
21.1 40.0 40.0
37.5 37.5
6.0 5.3
3.4 3.3 3.6 21.4
20.0 20.0 20.0
14.3 14.3
Domestic Europe US Asia Other 12.5
10.0
ex-domestic
59 50 30 28 19
0.0 0.0
Number of respondents
Domestic Europe US Asia Other
ex-domestic
ket, even outside markets such as the UK, where this 27 18 12 15 6
has long been the case. With the exception of direct Number of respondents
investment in domestic real estate, for which 58%
of respondents had hired an external investment is going in the wrong direction. The €3bn Pensions
consultant during the past three years, decisions on kasse APK has called a (possibly temporary) halt at
non-domestic European (79%), US (75%) and Asian 3% of the overall portfolio. Meanwhile, Dutch man-
(60%) funds all warranted external advice. The lower ager CSM Pension Funds has switched 5% of its real
score for Asian funds
34
is most likely the result of few estate allocation to emerging market equities as a
pension schemes investing in them, rather than a result of concerns about concentration risk.
perception that they need less help to do so.
20. What changes,
34 if any, do you plan to make
LITTLE OR NO CHANGE 18. What changes,
in the next two yearsif to
any, do you
your totalplan
realto make in the next
estate
There are unlikely to be major changes in investors’ to your total real estate
strategic asset allocation? strategic asset allocation?
real estate allocations over the next two years, but
there will be tweaks. Number of respondents to question
While most (51) pension funds aim to increase 29
their allocation, a significant number (25) plan to de-
crease theirs. In both categories, most of the planned Increase
changes will be modest. By far the largest category Decrease
of investors intend a change of between 0–2% (29
increase, 15 decrease); only nine intend a change of
more than 5%. 16
15
Although the average real estate allocation among
schemes polled is 14.2%, it belies significant varia-
tions, particularly between investors from different
markets. One perhaps surprising finding, given the 7
paucity of potential returns in Gilts, is that pension 6
funds that may have been expected to increase their 3
allocations have effectively placed a moratorium on
expansion.
Among Austrian schemes, for example, a 0.5% de- 0–2% 3–5% More than
crease in allocations to 3.5% across 2012 suggests it 5%
7EIRES 2013
Austria will be no fundamental change to our strategic real es-
tate portfolio” which makes up around 3% of the assets.
Sticking to what APK has already expanded the regional exposure to
include Northern Europe, while VVP is looking into
increasing diversification. “Over the long term we are
you know planning to expand our portfolio geographically,” says
Gligo. “At the moment we are very strongly focused on
Austria and Germany but we will add more properties
from other countries in Europe.”
Exposure to real estate is still only There have been some recent obstacles to the in-
an almost negligible part of most creasing of real estate allocations. Last year, there was
uncertainty as pension funds waited to gauge the im-
Austrian institutional investors’ pact of a regulatory change under which Pensionskas-
portfolios but some are seeking to sen might have had to to pay a lump sum tax on behalf
of their pensioners. In the end the impact was limited.
change this. In 2013, the amendments to the law governing the
pension funds (Pensionskassengesetz – PKG) took ef-
A
fect. The new rules do not alter investment regulations
ustrian institutions have always had to go directly, but once again, pension funds like the VBV are
abroad to achieve diversification in their real cautious to ensure they have sufficient liquidity in their
estate portfolios – if they had an allocation to portfolios.
the asset class in the first place. Under the new regulations, certain pensioners may
Overall, real estate only made up 3.5% of the ap- opt to transfer their money to an insurance-based
proximately €15bn in total assets under management in scheme (Betriebliche Kollektivversicherung or BKV)
the Austrian second pillar as per end-September 2012, offering guarantees. Most analysts believe that the
which is even less than at the beginning of the year costs of the transfer and the guarantee will stop most
when the exposure stood at 4%. pensioners from changing their pension vehicle. But, of
This is most likely due to the late start of Pensions course, pension funds like the VBV have to be prepared
kassen in Austria in the mid-1990s when real estate was for the worst, which in its case could mean an outflow of
not a necessary addition to portfolios as equities and €1.3bn in pensioners’ assets by November 2013.
L
bonds sufficed to generate returns.
Of course, that changed at the turn of the century ike most Austrian institutional investors, the
and pension funds started to move into real estate. The Pensionskassen are mostly investing indirectly
€500m Victoria-Volksbanken Pensionskasse (VVP) in real estate using external managers. Accord-
started to invest in real estate at the turn of the millen- ing to Böhm, this can consume considerable resources.
nium with an initial allocation of 5% in total over all “We strongly feel that it is part of our responsibility to-
portfolios. wards our pension fund members to constantly moni-
Like all Austrian pension funds, VVP offers different tor our external managers to check whether the fee
risk-adjusted portfolios for its clients to choose from structures and the performance are still up to the nec-
and some opt for no real estate exposure. essary standards,” he says. “But I have to admit it takes
Meanwhile, the property portfolio at VVP has grown more time than initially thought as it is not enough to
to make up 6–6.5% of the total assets under manage- just read a manager’s quarterly reports.”
ment but Claudia Gligo, head of asset management, Pension funds are cautious when it comes to control
says there is not likely to be any change to this alloca- over their investments and due diligence on co-inves-
tion. tors in pooled vehicles is important.
The €5bn VBV Pensionskasse is also planning to Gligo points out that all of VVP’s indirect invest-
maintain its 6% real estate exposure, which managing ments are externally managed but as Spezialfonds club
director Karl Timmel says “performed well” in 2012. deals and not in German open-ended real estate funds.
The pension fund is mainly invested outside Austria For this reason, fund-of-fund structures are “uninter-
with one pan-European and several Spezialfonds for esting”, Gligo adds, “because we want to have a seat on
Germany, Norway and Asia. an investment committee”.
Similarly, Christian Böhm, managing director of the For Böhm there is an additional drawback to these
€3bn multi-employer Pensionskasse APK notes “there vehicles – namely caution around additional costs and
8EIRES 2013
whether these are included in fund-of-fund fees. “The Recent deals
curse of diversification is additional costs and they do • October 2012: Union Investment Real Estate acquired
not always pay off,” Böhm says. the fully let Euro Plaza in Vienna for €150m. The 48,500
APK, like other institutional investors, has grown sqm office building was sold by Kapsch Immobilien.
more cautious when it comes to checking the real • The CCP III fund bought the Stadlay Shopolis retail
sources of return in a property portfolio, eschewing park in Vienna from Babcock and Brown for €150m.
leverage above 50% in favour of rental cash flow or
improved added value. Exotic investment approaches, such as debt funds,
Böhm – unlike most other Austrian institutional are not yet on the agenda. Although Gligo and Böhm do
investors – is always including opportunistic and value- not rule this strategy out completely as a future option,
add investments in his search for real estate, particu- they both stress the completely different risk-return
larly now that prices have increased considerably in the structures of debt investments and the challenge of get-
core segment. ting the pricing right.
VVP, on the other hand, still sees opportunities in the Listed real estate is also only used in tiny doses to add
core sector and it is now investing solely in core proper- diversification or to gain quick access to a market that is
ties. This strategy will stay in place over the medium otherwise trickier to enter.
term, with a concentration on commercial properties, Some pension funds are also increasing their re-
mainly office and retail. search regarding green properties and VBV’s Timmel
Other institutional investors in Austria have started points out that the green German property fund it is
to look at niche sectors like nursing homes, but for the invested in performed exceptionally well last year.
most part the portfolios are mostly made up of a mix- Meanwhile, foreign investors are discovering the
ture of office and retail assets. Austrian, or more particularly the Viennese property
Retail is also interesting for APK – Böhm notes that market – on the radar of many European property
shopping malls were still going strong during the crisis. investors looking for low-risk, stable returns – which
APK does not plan any major expansion of holdings in might make some Austrian institutional investors
the office and residential sector, other than from a few sorry they did not enter the market earlier or hike their
opportunistic investments in certain regions. exposure.
Germany tutional investor also wants to get “as close as possible
to bricks and mortar”. The Bayerische Versorgung-
Diversifying a skammer (BVK) is looking into REITs and the largest
Pensionskasse in the country, the BVV covering the
financial sector, is opening up its investment strategy
real portfolio to include global opportunities.
All four institutions are moving in different direc-
tions but mostly with the same aims: achieving stable,
diversifying returns while ensuring greater control
Real estate has ceased to be over their real estate investments.
a second-rank asset class for “Up until recently I had been of the opinion that
indirect investments into properties are preferable,
German institutional investors – but in a pooled fund you only have limited decision-
if it ever was. They know what making powers and you have to accept being tied to a
certain manager, sometimes for a decade,” WPV man-
they want and where they want it. aging director Hans Wilhelm Korfmacher explains.
In future, he wants “to reduce these limits to our
T
decisions” and if absolutely necessary he wants “to
he professional pension fund for auditors and be able to replace a manager” – therefore the funds
chartered accountants – the Versorgungswerk will be organised in a master structure which will also
der Wirtschaftsprüfer und der vereidigten allow the €2bn WPV to “either purchase properties
Buchprüfer (WPV) – is including direct real estate in directly or use several managers aiming at choosing
its property portfolio for the first time. Another insti- specialists for various countries and sectors”.
9EIRES 2013
1. Germany: regional breakdown 2. Germany: investment type breakdown
1. Germany: regional breakdown
% of total invested,
% of total invested, five respondents five respondents Direct Indirect Fund of funds RE securities
Domestic
53 Domestic
Europe ex-domestic
Europe ex-domestic
US US
5
6 Asia Asia
22
14
Other Other
Identical reasons for the creation of a master real estate,” says Fackelmann. As the BVK is limited
structure are given by the €23bn BVV, which will be to OECD countries in its real estate investments,
integrating its new funds for global opportunities in under the regulations for insurance-based retirement
property investments in a master-fund structure “to vehicles (VAGs) Asia and Australia are the two regions
be able to replace the managers easily if necessary”. “currently of particular interest” to the fund.
Meanwhile, the €10bn professional pension fund The BVV “will be setting up global mandates to en-
for doctors in Westfalen-Lippe, ÄVWL, has restruc- able us to make use of every window of opportunity”
tured its real estate team to increase the internal re- and adds the fund “wants to be able to participate
sources for monitoring external managers. The move wherever we see interesting investments – no matter
86
is part of an overall strategy to move closer to the the region or sector”.
underlying assets again, according to the investor, and Analysts agree that German institutions are more
become more involved with fundamental decisions at willing to go abroad in their search for real estate yield
the asset level. mainly because the necessary expertise is now avail-
Getting closer to the underlying asset and taking able on the market. Especially master fund structures
more control over returns generated in a portfolio is have allowed foreign asset managers to bring in their
also why some of the German institutions are cau- expertise to the German market more easily as they
tious when it comes to club deals or pooled funds. The do not have to set up a so-called Kapitalanlagegesell
financial crisis showed that achieving alignment of schaft (KAG) themselves. This is necessary to issue
interest between investors, their managers and their what is dubbed German institutions’ favourite invest-
fellow investors is an area that should be monitored ment vehicle, the real estate Spezialfonds.
carefully. One case in point is the so-called German During the latter half of 2012, when it was unclear
open-ended fund (GOEF) structures, which suffered whether or not the Spezialfonds would survive the
severe liquidity problems when some large investors government’s attempt to implement the Alternative
wanted out in the wake of the financial crisis. Investment Fund Manager Directive (AIFMD) with
O
a new Kapitalanlagegesetzbuch (KAGB), there was a
ne institutional investor notes “club deals or heated debate in Germany over the importance of the
pooled vehicles make more sense in Asia, the Spezialfonds.
US and Canada because otherwise the volume Some asset managers, especially those without a
invested would be too small to get into good deals”. KAG as part of their business range, pointed out that
And analysts agree German institutions will pool their for most large institutions it might be just as easy to
resources to enter new markets while they will try to invest in a Spezialfonds under a Luxembourg struc-
get individual deals at home. ture. Indeed, Korfmacher confirmed that the WPV is
This is also true for a large Versorgungswerk, such “currently deciding between a German investment
as the €53bn BVK. “In principle, we are aiming for structure or a Luxembourg vehicle” as administrator
separate accounts. But within these it might happen for its master-fund structure.
that we are entering into a joint venture, but this is not In fact, most institutions are already using a large
our preferred option,” Norman Fackelmann, head of number of different vehicles in their efforts to in-
real estate investment management, explains. crease diversification within the portfolio – according
The BVK wants to open up its view on property to their size and needs.
investments to include opportunities worldwide: “In The BVK, for example, is starting to move into
future we want to try and take a more global view on REITs for the first time while Korfmacher says “listed
10EIRES 2013
3. Germany: property type breakdown 4. Germany: strategy type breakdown
% of total invested, % of total invested,
five respondents Offices Retail Logistics Other five respondents Core Core-plus Value-add Opportunistic
Domestic Domestic
Europe ex-domestic Europe ex-domestic
US US
Asia Asia
Other Other
real estate does not suit our strategy at the moment Others, like the BVK, are widening their search
because this is an equity volatility which I do not want to core-plus and value-add property. Fackelmann
in the portfolio”. confirms: “As part of the diversification a few value-
But the BVK – which is around 25 times larger – add objects might be included maybe via the fund-
argues it is looking into REITs now “because with a of-fund structure.” The portfolio is currently 98%
€7.5bn real estate portfolio we have reached a size invested in core or core-plus; Korfmacher points out
where we want to diversify further, improve liquidity that WPV is not currently looking into project devel-
and enter new markets to diversify our risk”. Addi- opments, as he likes “to invest in properties that al-
tionally, Fackelmann points out that this vehicle will ready exist and are let to a certain degree if possible.
allow the fund to “aim for other sectors like health- Redevelopments, additions, and so on, are not part of
care” which according to him are “niches which we our business.”
could not cover otherwise”. Real estate debt might be another interesting area
Niche sectors are also on the agenda, especially if for WPV. At the moment, however, Korfmacher thinks
investors want to stay in Germany where the demand “senior debt conditions are so meagre that it is not at-
for core property has exceeded the supply. Despite tractive”. He adds: “I do need a certain spread to a cov-
their forays abroad, German properties will continue ered mortgage bond to warrant the additional risk.”
to make up the major share of almost every German The BVK, which has already financed one major
1.0
0.8
0.6
0.4
0.2
0.0
institution’s portfolio. project in Frankfurt, is “looking into other real estate
F
debt investments” and wants to stay in Germany as it
or many, the safe haven option is now residential “wants to start locally”. Other investors are entering
property in Germany, which had been rejected this side of the market via debt funds rolled out in late
in pre-crisis times because returns were too low. 2012 attracting institutions’ interest.
But now everyone wants in and in some regions the Nevertheless, experts think financing real estate
market has started to overheat slightly. In its Finan-
zmarktstabilitätsbericht 2012, a report on financial Recent deals
stability in Germany, the Bundesbank warned that • January 2013: GBRE Global Investors bought a 16,660
“price exaggerations are possible” in certain real estate sqm retail warehouse in Erding for its Pan European
sectors and regions of Germany but added the danger of Core fund for2.05
€38m.
a bubble in Germany in general remained low. • January 2013:
1.47 Union Investment Institutional Prop-
Some investors have pinned their hopes on the ap- erty acquired three Berlin apartment blocks, comprising
proximately €22bn in properties that will have to be nearly 1,400 units for €87m.
sold by GOEFs in liquidation over the coming years. • December 2012: Hahn Immobilien bought 16 prop-
But others argue those will not help bring down prices erty companies, allowing access to a portfolio of retail
in Germany either as many of the funds’ holdings are properties spread out across Germany. The 146,000 sqm
elsewhere in Europe. in rental volume is located in North Rhine-Westphalia,
Therefore, German institutions are looking into Lower Saxony, Bavaria, Saxony, Baden-Württemberg and
alternative sectors: ÄVWL has moved into infrastruc- Brandenburg, leased to a number of supermarket chains.
ture by buying grid operator Amprion together with • October 2012: Fund EPI sold a department store
other Versorgungswerke. Another institutional inves- in Frankfurt for €115m. The 44,412 sqm development
tor is also planning to up its exposure to infrastruc- is currently one of the largest stores in Germany and
ture, mainly via wind energy. houses the flagship store of retail chain Karstadt.
11EIRES 2013
deals will remain difficult given the banks’ reluctance they are taking a much more individualised approach
to provide capital. This in turn is an opportunity for to diversification in these portfolios which make up
equity-strong investors like many German retirement around 10% of the total assets under management on
vehicles with mandatory contribution schemes. Korf- average.
macher says: “Being able to replace debt with capital The crisis has occasionally presented investors with
is also one of the reasons for us to go into individual bitter truths about correlations in their portfolio as
funds rather than pooled funds”. well as the performance of managers – consequently
Overall, German institutions have probably never they are now trying to gain as much control as possible
been more focused on real estate as they are now. And over both.
Netherlands 1.1.Netherlands:
Netherlands:regional
regional breakdown
breakdown
Pension funds
24 % of total invested, 17 respondents
Domestic
28
shift towards
18 Europe ex-domestic
68
US
5
listed 17 32 Asia
Other
Risk management is driving
some pension funds into listed 2. Netherlands: investment type breakdown
real estate – and others to reduce % of total invested,
17 respondents Direct Indirect Fund of funds RE securities
their allocations.
Domestic
D
Europe ex-domestic
utch investors have lost none of their volu-
minous appetite for real estate over the past US
year, although that looks set to change. 86
Asia
Currently, the larger the pension fund manager, the
more likely it is to be slightly overweight in the asset Other
class. APG and PGGM, for example, have both margin-
ally exceeded their target allocations – 10% and 12%, other asset classes. CSM Pension Funds, for example,
respectively. pulled out of direct investment in real estate last year
Some smaller pension schemes have tended to al- over regulatory concerns about concentration risk. The
locate significantly higher percentages of their overall result has been that its 10% target allocation to real es-
portfolios to property. Although Pensioenfonds TDV tate has changed to a 5% allocation to listed real estate
plans to decrease its 25% strategic allocation over the and 5% allocated to small emerging market equities.
next couple of years by 3–5%, director Theo Hillen
says the reduction is “not that important – we’ll still Risk and regulators set return limits
have one of the highest allocations in the Netherlands These examples point to two of Dutch investors’
afterwards”. immediate and related concerns: risk reduction and
Although Hillen says the primary driver of TDV’s regulation. The intensified emphasis on risk manage-
planned reduction is to reduce risk within the port- ment is being driven in part by regulatory scrutiny. Ac-
folio, including concentration risk, he acknowledges cording to the supervisor, DNB, 231 pension schemes
that the Dutch central bank (DNB), which regulates have yet to meet the required coverage ratio. It is clear
pension schemes, has identified it as an issue. that shifts in real estate allocations to generate higher
Pressure to reduce risk within the overall portfolio yields will form part of plans to meet short and long-
has encouraged some pension investors to divert at term solvency targets.
least part of their allocation out of real estate and into Several pension fund managers have pointed to
12EIRES 2013
3. Netherlands: property type breakdown 4. Netherlands: strategy type breakdown
% of total invested, % of total invested,
17 respondents Offices Retail Logistics Other 17 respondents Core Core-plus Value-add Opportunistic
Domestic Domestic
Europe ex-domestic Europe ex-domestic
US US
Asia Asia
Other Other
a greater need for their portfolios to deliver higher years – so liquidity is important,” says specialist asset
returns – but within acceptable, usually cautious, risk manager Marc van Maarle.
parameters. “With unlisted, you would have the same prob-
“Our major objective is to deliver real estate re- lem you would have with direct investment. A large
turns, while diversifying the total portfolio and con- chunk of investment in private equity is even harder
trolling risks,” says Maarten van der Spek, senior to sell [in the current market] at the right price – and
strategist and researcher for private real estate at direct holdings we could sell at a better discount
PGGM. than private equity holdings. But so far the regulator
Overall, core still dominates domestic (67%), Euro- hasn’t mentioned anything about private equity.”
pean (80%) and US (78%) portfolios, although core- SPF Beheer strategy and acquisition manager
plus has gained some domestic traction and Asian Bauke Robijn in turn has expressed concern over
portfolios are split more evenly between core (38%) potential leverage in private investments. “Extra risk
and value-add (38%). is not something we want in the real estate portfolio,”
For higher returns, Dutch pension funds are looking he says.
to next generation asset sub-classes. Debt is emerg- Another manager says his pension provider em-
ing as a potentially significant category. One portfolio ployer was looking to increase its allocation to listed
manager says he was unlikely to invest in debt before real estate, perceived as offering better quality assets
1.0
0.8
0.6
0.4
0.2
0.0
2014, although he will watch carefully to see how the and greater transparency than non-listed funds or di-
real estate debt market develops and conduct in-house rectly held real estate. The move, long on the wishlist,
research into whether the risk/return profile is ac- will likely begin this year or next.
ceptable. But a potential problem for this portfolio manager
“The [real estate debt] market isn’t there yet. People is that directly held assets, which currently make up
are putting money into it but we’ll wait to see what around 40% of the domestic portfolio, could prove
works and what doesn’t,” he says. difficult to sell in a moribund office market without
Meanwhile, Dutch pension funds, faced with up- a significant discount. “That can hold up the process
coming liabilities, are looking to improve the liquidity but we’re not in a hurry,” he says. “Things are going to
of portfolios comprising what is essentially an illiquid change but it will take a few years.”
asset class. The result in some cases appears to be a Eventually,2.05 listed could make up 30–40% of the man-
partial shift towards listed real estate. Although listed ager’s overall1.47portfolio – a percentage he says would
accounts for just 4% of overall domestic portfolios, it bring the provider closer to the rest of its peer group.
makes up 45% of non-domestic European, 70.5% of Listed currently comprises 70% of its Asian exposure
US and 55% of Asian portfolios. but a negligible percentage overall. The portfolio man-
In PGGM’s case, the requirement for liquidity has ager is also looking to invest in listed infrastructure for
resulted in a strong position in US property. The US what he described as “more dynamic exposure”.
accounts for more than 50% of the listed market,
hence the pension fund manager’s 39% allocation to Inflation, diversification drive sector and market
North American real estate. At the same time, 30% of preference
its private real estate allocation is invested in the US. In the meantime, pressure to generate returns while
CSM Pension Funds will not in fact invest in non- modifying risk has not necessarily led Dutch pension
listed real estate because of the liquidity issue. “Our schemes in the same direction. SPF Beheer, for exam-
liabilities are quite short term – around six to nine ple, is looking to divert part of its inestment alloca-
13EIRES 2013
tion in office towards retail, despite non-food retail’s ket, which accounts for 10%. With 16% allocated to
recent poor performance, because of its potential the rest of Europe, it has 39% invested in the US and
inflation-hedging characteristics. Retail currently ac- 26% in Asia. “We’re a true global, diversified player
counts for 33% of the overall domestic investments of on the real estate spectrum,” says van der Spek.
institutions surveyed, compared with office’s 15%. In In contrast, Pensioenfonds TDV and Pensioenfonds
the rest of Europe, the difference is even larger: 55% Grontmij both have more than 90% of their respective
for retail, compared with 24% for office. portfolios invested in the domestic market. For Altera
Speaking of the scheme’s domestic portfolio, Robijn Vastgoed, the figure is 100%. Overall, the Dutch mar-
says: “Over the next 12 months, office will be much ket accounts for 18% of investors’ allocations.
more work in terms of the management effort and the Yet even for larger players, euro-zone macro uncer-
focus on the tenant. But there are opportunities in the tainty could lead to a switch in the regional weight-
market. We could sell more assets that don’t meet our ings of geographically diversified portfolios towards
inflation-hedging requirements and buy more that do.” North America and potentially Asia. “There will be
The pension scheme expects prices for domestic no big changes to [our] allocation, though there may
residential – likewise, a potential inflation hedge – to be some minor changes in detail,” says van der Spek.
fall still further as a result, among other things, of “The European outlook isn’t good, especially relative
government measures, which will create opportuni- to other markets, so we may be slightly more defensive
ties to acquire assets at the bottom of the market. In in Europe than in Asia.”
the meantime, the pension fund is developing new He adds: “Nothing specific keeps me awake but I
percentage allocations for each asset class, although worry about risk in Europe. If there were a big struc-
Robijn says these will be sufficiently flexible to exploit tural market-changing event, the impact on real estate
opportunities in the market. would be strong. Some people think the euro-zone
There is significant diversity among Dutch inves- could break up. Personally, I don’t think it will, but the
tors when it comes to geographic diversification. uncertainty is there for all investors.”
Unsurprisingly, the larger the pension fund or pen-
sion fund manager, the more globally diversified its Fees, transparency top external manager concerns
real estate allocation is likely to be. PGGM’s portfolio It is not yet clear what impact the shift towards listed
is overwhelmingly invested outside its domestic mar- will have on pension funds’ reliance on external
managers. In recent years, there has been a bifurcated
Recent deals trend for larger pension funds and pension fund man-
• May 2013: Real IS Investment has purchased the De agers to opt for joint ventures and club deals, avoiding
Kroon mixed-use property in The Hague for €38m from blind pool funds. A few smaller investors, such as Al-
joint developers MAB Development and Haag Wonen tera Vastgoed, manage their entire portfolios in-house
housing corporation. – an approach made substantially more possible when
• April 2013: The real estate manager, Delin Capital As- the portfolio is exclusively domestic.
set Management, has acquired Distripark Sittard, a dis- Possibly because of a strengthened regulatory
tribution warehouse located in Born from DHG Group. requirement for asset-level risk management, as well
The purchase price is estimated at €36m. as an incremental recasting of external managers as
• March 2013: Jones Lang LaSalle’s Hotels & Hospital- investment partners, clarity of investment process, un-
ity Group has sold the Hotel Ibis Hague City Centre to derstanding of what the client is trying to achieve and
the Internos Hotel Real Estate Fund. According to John stability of investment teams emerged as significant
Laing, the sale of the hotel for €15.5m, reflects a gross priorities for some investors. But almost all the pen-
yield of approximately 7.36%. sion fund investors who invest domestically via funds
• March 2013: Union Investment Real Estate has – which account for €1bn compared with €7bn invested
acquired a development project comprising Akzo directly – identified level and transparency of fees,
Nobel’s new headquarters, which will be transferred to alignment and strong governance as non-negotiable.
the holdings of open-ended real estate fund UniImmo “When it comes to choosing external managers, we
Deutschland, and the Amsterdam Marina Offices, ac- determine the right one to supplement our portfolio,
quired from ASR Vastgoed Ontwikkeling. and then we will look for the best manager to deliver
• February 2013: Fidelity Worldwide Investment has it, based on criteria that include strong governance
acquired the Sonion office property in Beukenhorst Zuid and transparency,” says van Maarle.
business park in Hoofddorp for €12.4m. According to “We see ourselves as a partner for fund managers,
Fidelity, the price reflects a net initial yield of 8%. The and selecting managers is a deal we’re doing for the
property was purchased from OVG. long term.”
14EIRES 2013
Nordics: Denmark, Finland & Sweden 1.1.Nordics:
Nordics:regional
regional breakdown
breakdown
Northern safe 24 % of total invested, 10 respondents
69
Domestic
havens
0.5
Europe ex-domestic
68
US
11
Asia
Investors see the Nordic 0.5 19
countries as low-risk, safe haven Other
markets. But challenges such as
size and liquidity remain. 2. Nordics: investment type breakdown
% of total invested,
10 respondents
T
Direct Indirect Fund of funds RE securities
he Nordic real estate markets are not homog- Domestic
enous, although all have fared relatively well in Europe ex-domestic
the global economic downturn and are there-
fore seen as safe havens for international investors. US
Despite good fundamentals – 2013 growth rates for 86Asia
these three countries and Norway are estimated at
between 1.4% and 2.1% according to Eurostat – they Other
have been affected by the global financial crisis and the
lingering uncertainty from the European debt crisis.
Sweden has attracted the most foreign capital into dic region has remained well above €10bn. The only
real estate, followed by Finland, whereas Denmark has exception to this was in 2009, when annual volume
remained more heavily dominated by domestic players. dropped to €5bn, as a result of the financial crisis.
Nevertheless, the stability of the economies contin- In 2011, the Nordic transaction volume amounted
ues to have a positive influence on the Nordic property to €15bn, according to DTZ.
investment markets. Investors have targeted Sweden in particular, and
Domestic investors have maintained their competi- the country has climbed into the top five countries in
tiveness, but international investors view the region as terms of property transaction volume.
a safe haven where it is still possible to achieve fair and In the first half of 2012, transaction volume de-
stable returns with relatively low risk. creased in most European countries, but increased
However, challenges remain such as the size and in the Nordic countries from the same period a year
liquidity of the markets. before.
According to indices from IPD and KTI, total In 2012, the investment market was particularly
returns have remained quite attractive in the Nordic active in Sweden whereas in Denmark and Finland
property market. market activity was relatively low.
In 2012, Sweden was the best performing real estate
market in the region, producing a total return of 6.4% DENMARK
in local currency terms. Finland also performed rela- The tendency of investors internationally to focus on
tively well, with a total return of 6.0%. In total, Nordic lower risk is one factor behind the high level of inter-
countries produced a return of 6.6%. est in the Danish property market.
The best performing sector in 2011 was Swedish re- “Compared to the last three years, we don’t expect
tail, followed by Swedish offices and industrial proper- to see a significant change in the agenda of the market
ties and Finnish residential. in the coming years, the lack of bank financing is the
At the other end of the spectrum, Danish residen- key issue, and therefore the market is dominated by
tial, Finnish office and Danish industrial sectors pro- investors who have equity,” says Jan Østergaard, CIO
duced the lowest total returns, due to negative capital at Industriens Pension. “This type of investor is typi-
growth. cally very aware of yield versus risk.”
The total annual transaction volume of the Nor- This high level of interest from international inves-
15EIRES 2013
tors is a new factor in the Danish property market. 3. Nordics: property type breakdown
Not only are the Scandinavian countries seen as safe
% of total invested,
havens in the current euro crisis, but Danish cities are 10 respondents Offices Retail Logistics Other
seeing monthly population rises, notes Michael Niels-
en, managing partner at ATP Real Estate Partners. Domestic
Real estate yields in Denmark are currently seen as Europe ex-domestic
satisfactory compared to those of other asset classes,
but looking ahead, investors see a risk that large in- US
stitutional and international investor interest could
Asia
push yields downwards.
There seems to be little prospect of rising yields as Other
investors chase these core investments.
“As long as we have such a low interest rate environ- 4. Nordics: strategy type breakdown
ment, there will be buyers at these low yields,” Nielsen
says. % of total invested,
10 respondents Core Core-plus Value-add Opportunistic
PensionDanmarks’s head of real estate Mogens Muff
reports renewed interest in residential property invest- Domestic
ments in Copenhagen from institutional investors. Europe ex-domestic
Research from Colliers International confirms
demand is still centred on the residential segment in US
Denmark, and that this is especially the case in the
Asia
large cities where investors are interested in both
existing properties as well as housing projects. Other
The continuing concentration of the Danish popu-
lation is capturing the attention of investors. Popula-
tions of large urban areas are on the increase while Recent deals : Denmark
occupation levels in peripheral regions are coming • December 2012: PKA, PensionDanmark and Sampen-
under pressure. sion signed an agreement with property administrator
Even with demographics in Copenhagen and Århus DEAS and Nordic contractor MT Højgaard to cooperate
making residential and prime commercial proper- on future construction-related projects, investing as
ties very attractive, Østergaard points to uncertainty much as DKK5bn (€670m), within Public Private Part-
ahead because of the general state of the economy. nerships.
“Prime are at the moment the only attractive in- • November 2012: Commercial pension provider Nor-
vestments, because in general yields are still too low dea Life & Pension and labour-market pension funds
compared to the risk on other real estate investments PensionDanmark and Lægernes Pensionskasse bought
opportunities,” he notes. a construction plot in the Ørestad district, next to the
The retail market may be strained overall, but headquarters of the Danish national broadcaster DR, to
demand is strong for investment properties hous- own and build Nordea Bank Denmark’s new headquar-
ing retail businesses in primary locations. For office ters in Copenhagen, in a DKK1.3bn joint investment deal
properties, the divide remains sharp between proper- • September 2012: Meyer Bergman European Retail
ties in primary and secondary locations. Demand for Partners II acquired a property on a prime location in
office properties in central Copenhagen is high, as it is Copenhagen. The building has a retail area of 5,000 sqm
in other prime locations including Ørestad, Broerne and the price was DKK250m.
and Valby. • August 2012: Cubic property fund acquired three
But in the south and west of Copenhagen demand is properties on Copenhagen’s most famous shopping
decreasing drastically due to a weak rental market in street, Strøget, for DKK430m.
secondary locations. • June 2012: Jeudan acquired a portfolio of seven office
This trend broadly holds for industrial and logistics buildings in inner Copenhagen. The portfolio has a com-
properties as well, with primary locations remaining bined area of 13,000 sqm, a yield of 5% and a total price
attractive. of DKK349m.
Danish institutional investors have slimmed their • June 2012: PKA and Topdanmark acquired the build-
allocations to real estate over the last four years, ac- ing project ‘Udsigten’ for DKK1bn. It has a combined
cording to the Danish pensions and insurance associa- area of 45,000 sqm and includes 458 residencies and one
tion Forsikring & Pension. The average allocation to commercial lease.
16EIRES 2013
the asset class has fallen to 12.4% currently from over Recent deals : Finland
14% in 2007–08. • November 2012: Pension insurance company Varma
Demand from the institutional side shows signs of acquired the fourth phase of Lempola Retail Park from
expanding, however, with some of the country’s large NCC. The 2,065 sqm property was completed in Novem-
pension funds indicating they intend to increase prop- ber. The transaction price was not disclosed. Varma also
erty holdings. owns the first three phases of the Lempola Retail Park.
In the next few years, for example, PensionDan- • Q2/2012: Shopping centre under construction of
mark plans to increase its investments in real estate 26,300 sqm in Hämeenlinna bought by Keva for €100m.
to about 10% of assets from 6% now, which means the • Q2/2012: Portfolio of 37 retail properties of ca 31,000
fund would put DKK2bn into real estate every year. sqm was acquired by SN Properties Ky fund (Amplion’s
On top of this, some investors see infrastructure fund).
allocations increasing as Public Private Partnership • Q2/2012: Helsinki CBD office property of 8,700 sqm
structures become more common. Some of the key in- was acquired by The Central Church Fund of the Evan-
stitutional investors – notably PensionDanmark – are gelical Lutheran Church of Finland for €37m.
moving to facilitate these financing structures. • Q1/2012: Portfolio of 68 grocery store properties
This could result in more investment opportunities bought by Sveafastigheter and Capitol Asset Manage-
in public construction projects, such as hospitals and ment for €100m.
local authority buildings.
Industriens Pension expects investment opportu-
nities of this type in the future, as long as the price is predicts that second and third tier locations will show
right, Østergaard says. signs of yield widening.
But some investors still doubt that these hoped for The retail and business park sectors continue to
deals will come off because the public authorities will experience strong demand in Finland, according to
expect pension funds to take on too much risk for too Colliers International.
little reward. Financing is still a major problem and the main
cause of low transaction activity. Industry experts say
FINLAND financing is still available, though mainly for existing
Investor demand in the Finnish property market fo- and well-regarded clients.
cused on prime properties in 2012. This trend pushed The slowdown in market volumes has made it hard
yields in this segment lower, and prices to the pre- for international investors to realise investments. But
crisis levels of 2007. the level of forced sales due to refinancing problems or
But institutional investors still see yields as satis- covenant breaches has remained low.
factory, especially in prime areas of Helsinki. They Regardless of cyclical changes, the Finnish market
remain supported – at least in part – by the restricted remains a small and relatively illiquid one, and pen-
investment supply. sion funds see no change on this front.
As Hanna Hiidenpalo, CIO of LocalTapiola Pen- The largest transactions in Finnish property have
sion, points out, on average the yield level is still sub been undertaken by Finnish pension companies, Ger-
stantially higher than in many other European prime man investors and foreign property funds.
markets. According to the Finnish property information and
While housing markets have made steady positive analysis firm KTI, only 12% of investors in the market
progress, particularly in the Helsinki area, office mar- are from overseas, with domestic pension and insur-
kets in Finland have seen a clear rise in vacancy ratios. ance companies making up 40% of all investors.
“We believe we will see more challenges on that Most large domestic investors prefer direct or
front in the future,” predicts Timo Ritakallio, CIO of unlisted investments with only a few taking the listed
pensions insurance company Ilmarinen. route. One of the more unusual investors is Valtion
Hiidenpalo also sees this as one of the main prob- Eläkerahasto (VER), the state pension fund, which
lems in Finnish real estate. A particular difficulty is does not invest directly in Finland and has the major-
the high level of speculative property development ity of its investments abroad, also via funds.
and new construction, she says. On average Finnish institutional investors allocate
The trend towards a divergence between yields in 10.6% into real estate, a number which has remained
prime and secondary locations is seen as intensifying fairly stable since 2005 and peaked at 12.5% in 2007,
in the future. according to statistics from TELA, the Finnish Pen-
Ritakallio says yields on prime locations are unlike- sion Alliance.
ly now to change from their current tight levels, but
17You can also read
