UK - The National Grid UK Pension Scheme has invested approximately £70m (€81m) in UK real estate this year and its advisers expect to commit a similar amount again during the second half of this year and in 2010.
The pension fund has bought two Grade-A fully-let buildings in Callaghan Square , Cardiff, in Wales from property developer MEPC, for £22.6m at a blended net initial yield of 8.51%.
The acquisition follows the purchase of three UK industrial estates earlier in the year, amounting to approximately £70m in total.
Paul Griffiths, head of national investment at the UK arm of BNP Paribas Real Estate, which advises and manages the pension fund's real estate investments, said he expected more investments to be made on behalf of the pension fund in 2009 and beyond.
"We are very much looking to invest further for them, to take advantage of the strong income yields available from property at the moment," he said. "It is part of an ongoing acquisition programme which will continue into next year at least."
The National Grid pension fund is being flexible with the volume of capital it is making available to deploy in UK real estate.
"It is not a set amount that we have to invest, but what the fund is saying to us is if good opportunities are available at the right price then there is substantially more money available," added Griffiths.
The pension fund's real estate portfolio was underweight industrial prior to 2009, but thanks to this year's acquisitions it is now balanced across all sectors.
Consequently, BNP Paribas is now screening all property sectors in the UK for investment opportunities.
"We are not overweight in any particular property asset class. It is pretty much equal across all sectors that we can buy in," Griffiths said. "So it is more about the property than the sector it is in."
He also said there had been a "huge change" over the past six to eight weeks as UK pension funds are returning to their domestic property market.
"The market is operating fairly normally again," he said. "That is pushing prices up again, not dramatically, but prices have certainly stabilized. For prime property the values are getting higher and the yields are coming lower."
Griffiths said there was a lot of competition for prime assets in central London and the West End from international investors, while UK pension funds were tending to target regional centres across the UK.