(Bloomberg) -- The rise in long-term interest rates is welcome news for the real estate arm of Norway's $1 trillion wealth fund.
That's because it could trigger a move by investors into bonds and put more property assets on the market, according to Karsten Kallevig, chief executive officer of Norges Bank Real Estate Management.
“If people are forced to sell, then it would be very positive for us,” he said in an interview in Oslo. “We'll get access to properties.”
The world's biggest wealth fund is in the process of building up a property portfolio that will eventually account for about 7 percent of its assets. It now holds 218.6 billion kroner ($28 billion) in real estate, or 2.6 percent of its assets, after snapping up properties in key global cities such as London, New York, Paris and Tokyo.
The fund is invested for future generations of Norwegians, which often allows it to buy as markets are falling.
higher rates aren't necessarily negative for the commercial real estate market, Kallevig said. “However, if rents stay low and long term yield levels rise considerably, then you could see that people shift money back to bonds, that's for sure,” he said.
The fund invested 15 billion kroner ($1.94 billion) in unlisted real estate in 2017, it said in a report on Tuesday. The fund made its first investments in Asia last year, when it acquired a 70 percent stake in five properties in Tokyo.
Overall the fund delivered its best return on record last year and also confirmed its commitment to the U.K., no matter the outcome of the Brexit talks.
The message was reiterated by the real estate investment arm on Tuesday. The investor increased its exposure to London last year, making the U.K. capital its top investment followed by New York and Paris.
“London will continue to be an important city in Europe, it has been for a long time and will continue to be,” Kallevig said.
To contact the reporter on this story: Sveinung Sleire in Oslo at ssleire1@bloomberg.net.
To contact the editors responsible for this story: Jonas Bergman at jbergman@bloomberg.net, Stephen Treloar
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