REAL ESTATE - CalPERS’ investment in European real estate will spur other US pension funds to invest in European office and retail, according to Henderson Global Investors.

"If the logic has been accepted by CalPERS, it will be accepted by other public sector pension funds," said Patrick Sumner, head of property equities at the investment management firm. "Others will follow suit, though probably not on the same scale.

"I can already see it coming," he said, adding that US investors would likely go into the listed real estate sector because "it’s easier to invest in and they can get a good geographical spread of exposures."

A second investment target will be European REITs because US investors "have been dealing with them at home".

More generally, US interest in European real estate will be driven by underweight allocations to real estate. The target allocation of the average US pension fund stands at just over 8%, compared with actual allocations of 5%.

He said shrinking vacancy rates and strong rental yields on new-build office in London and Paris would feed US investor demand – in contrast to less-than-buoyant uplift on rent review – with the Parisian office market remaining strong over the next two years.

He also identified investment potential in European shopping malls because of their "quasi-monopoly characteristics".

"Bluewater [the UK shopping centre] can’t be created elsewhere. It has clear monopoly pulling power."