UK pension funds reduce property exposure

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UK - Pension funds and insurance companies decreased their exposure to commercial property by £75 million in the third quarter of 2001 - the first quarter of negative net investment since the quarter following the emerging market crisis at the end of 1998, according to National Statistics data published today and analysed by DTZ Research.

National Statistics says that while the data provides strong support for the hypothesis that institutional investment activity has slowed on the very heavy levels seen last year, activity over the year to date remains well above the long-term average.

The 2001 third quarter decrease of £75 million compares with an average quarterly increase of about £1.2 billion since the beginning of 1998.

DTZ says the fall in equity prices since the beginning of last year has pushed property’s weighting in the investment portfolios of some funds towards the top end of allowable ranges.

As a result pension funds and insurance companies have held back on spending their investment allocations pending positions in other markets.
High levels of uncertainty in the early weeks following September 11th will also have contributed to lower purchasing activity in a quarter, which is typically quieter than the other three, according to DTZ.

However, DTZ Research data on purchasing activity in the final quarter of 2001 reveals that general buying activity picked up significantly boosted by high levels of investment by overseas purchasers and private investors.

The firm says it expects institutional investment to have followed a similar pattern when year-end data is released in the first quarter of 2002.

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