FINLAND - Varma Mutual Pension Insurance Company is expected to slow its domestic real estate investment programme in 2011, following two years of intense activity, citing rising vacancies and an influx of foreign investors.

The Finnish pension company has just announced the development of 176 rental apartments in Helsinki, but this €25m investment pales in comparison to the €1bn in Finnish transactions it undertook in 2010 and 2009.

Tuomas Vaarasalo, construction manager at Varma, said: "We have acquired or developed about 500 apartments during the past three years. For 2011, we are not going to invest as much as we have in 2010 or 2009."

Varma has entered into a contract with Skanska Talonrakennus for the development of 11,000 square metres of living space in the Herttoniemi region of Helsinki.

Vaarasalo said high quality, centrally located rental apartments were a natural part of Varma's investment practices for safeguarding its pension funds.

But he added that the "exceptional" pace of recent investment would be scaled back in 2011 due to rising vacancies in the Helsinki office sector and also because the return of cross-border investors in Finland is increasing competition for local institutions.

A number of global investors have been active in Finland during the last couple of months, including Aberdeen Property Investors and Germany's Union Investment.

Swedish opportunity fund manager Svaefastigheter has just announced it acquired two office properties in Helsinki in a joint venture with Finland's HGR Property Partners.

The two properties, let to TeliaSonera on long leases, were bought from Delek Global Real Estate, and the transaction was financed by two German lenders, Aareal Bank and Heleba.

Svaefastigheter raised €120m from Swedish and global institutional investors for its third Nordic opportunity fund in 2010.

Vaarasalo said: "Foreign investors are being more active in the Finnish market at the moment, and institutional Finnish investors like pension companies have faced more competition than they have during the last two or three years."

Varma's real estate portfolio is worth some €4bn, roughly 12% of its €32.2bn in total assets under management.