Despite reining in its real estate investment operation last year, Norges Bank Investment Management (NBIM) said it expects to diversify the Government Pension Fund Global’s property portfolio and to remain a net buyer of assets.

The Norwegian sovereign wealth fund is likely to move into new sectors such as residential and life sciences, according to a review of its unlisted property investments published this week, marking a decade since the fund was first given a mandate to invest in the asset class.

“In the coming years, we expect to be a net buyer of real estate, but with more disposal activity than during the first decade,” the report said.

Real estate assets reached NOK273bn (€25.7bn) at the end of last year, representing 2.7% of the fund. The report said that just maintaining this level of exposure would require significant investment activity in the years ahead.

The fund’s unlisted real estate exposure is still significantly below its maximum allocation of 7%, although the report acknowledged that the target was effectively 5% because of the need to provide a buffer in case of sudden declines in equity markets.

NBIM said it would continue to increase the size of the real estate portfolio while disposing of assets that were no longer aligned with its strategy.

“Uncertainty in the retail landscape, and office investments becoming increasingly operational as tenants demand more services, may lead us to explore other sectors for our unlisted real estate investments,” it said, adding that “smaller sectors such as life science buildings may cater well to our investment targets”.

The report said: “While commercial tenants usually lease only what they need, even if they can afford more, residential tenants usually lease as much as they can afford, rather than how much they need.”

It added that income from residential property tended to be stable, and capital expenditure between tenancies tended to be lower, although the sector was more management intensive.

NBIM said it had streamlined its German office strategy to focus only on Berlin, leading it to sell its Frankfurt and Munich assets last year.

“Going forward, we hope a narrower strategy centred on Berlin will allow us to deploy more capital efficiently,” NBIM said.

NBIM also said it would “remain selective” when choosing properties to be managed internally due to limited resources.

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