EUROPE - European pension funds are on a regional shopping spree motivated by a limited supply of new assets in low-risk markets, according to Aberdeen fund manager Nico Tates.

Tates, who manages the Aberdeen European Shopping property fund, cited IPD figures suggesting the asset sub-class continues to offer low volatility with strong performance in mature European markets. 

"The supply side is restricted because of strict zoning regulations in mature markets so existing supply will go up in value," he told IPE Real Estate.

His comments followed the fund's first closing, adding European pension funds were looking to pan-European retail in order to diversify outside their domestic markets but avoiding the risks of direct investment.

The fund invests in the Netherlands, Belgium, France and Germany but its investments to date have mainly been in the Netherlands, its home market.

Asset-wise, Tates said he was interested in unit (high street) shops, especially in the Netherlands and Belgium. Paris is also seen as a possible location for these kinds of assets, although he believes they are "expensive and rare" to find in the French market.

Similarly, the fund will also invest in retail warehousing and under-managed shopping centres.

The fund's value-adding strategy is an indication of dwindling supply against continuing demand, as Tates pointed to the recent acquisition of a Dutch shopping centre.

"The basics are there. It's in a good catchment area and consumer spending is strong."

However, poor tenant mix, an unattractive ambience and poor parking means the asset had so far failed to reach its potential value to consumers and retailers.

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