Norway's $870bn sovereign fund to invest in Asian real estate

Norway's Government Pension Fund Global (GPFG), the world's biggest sovereign wealth fund, now plans to add Asian properties to its global real estate portfolio.

To begin with, the $870bn (£583.5bn, €799.6bn) wealth fund will target commercial real estate in Singapore and Tokyo, according to Karsten Kallevig, head of real estate investments at the Oslo-based fund.

The focus is on specific markets rather than sectors, Kallevig told Bloomberg.

Just as in purchases in Europe and the US, the fund will find partners for its planned Asian expansion, Kallevig said.

GPFG held about 2.2%, or $18bn, of its assets, in real estate in 2014, and aims to grow that share to 5%.

"Tokyo is arguably the single biggest market in the world for real estate," Kallevig told the news agency.

While GPFG does not have a definitive spending target, "we can invest a lot in Asia", he said.

"When we say Singapore and Tokyo, we mean the better parts" of those cities, he said.

"My guess is office properties will be the main component, because that's what's for sale in those parts of town. There aren't many shopping malls in the center of Tokyo or the center of Singapore.

"If we're really successful there, then maybe we can add a third and a fourth and a fifth city at some point," Kallevig added.

Vacancies and rents

Japan's commercial property market has shown signs of a recovery, with office vacancies, a gauge of unoccupied space, in Tokyo falling to 5.3% in February from 7% a year ago, according to brokerage Miki Shoji.

The Tokyo Stock Exchange's REIT index has returned 28% over the past 12 months.

In Singapore, office rents in the central business district jumped 14% in 2014, the biggest increase in the region, amid tight supply, according to consultant Jones Lang LaSalle.

GPFG has acquired properties in several cities the world over, including in London, Paris, Berlin and New York.

Its realty portfolio returned 10.4% in 2014, while the total fund gained 7.6%.

The fund was allowed to inject money into real estate in 2010 after being restricted to investing in stocks and bonds.

The GPFG holds the surplus wealth generated from Norwegian petroleum income. Oslo generates money for the fund from taxes on oil and gas, ownership of petroleum fields and dividends from its 67% stake in oil major Statoil.