When it presented its results for 2023, Norges Bank Investment Management reported that its global property exposure had returned 0% over the past year. However, this neutral performance conceals a much more mixed picture.

In France, for example, property is underperforming in terms of capital but doing well on an operational basis, reflecting a variety of economic factors that are making the markets more complicated,

"It has been a very challenging year for real estate investments," said Mie Caroline Holstad, chief investment officer, real assets, at a press conference this week. "We have seen a significant repricing and the main reason was a combination of rising interest rates and inflation."

While its listed property investments, valued at €55.9 billion, generated a capital return of 17% for the Norwegian pension fund, the value of its private property portfolio fell by 12%. "Listed markets are typically much quicker to adapt to economic changes and the signs of falling rates and falling inflation towards the end of last year let to a real bounce back for our listed portfolio, resulting in a return of 17%," Holstad continued.

Believing that "the listed portfolio actually provided us with flexibility to react to market events and adjust the portfolio during the year", she pointed out that NBIM had reduced its exposure to "distressed" office sectors to just 10%, focusing instead on listed property companies with exposure to sectors such as residential, retail and data centres. "And those were all relative winners" last year, added Holstad.

Speaking on Business Immo television, Guilain Decrop, head of Continental Europe, said at the last Simi conference: "For five quarters now, the value of our property portfolio in continental Europe has been falling and, in the light of our projections for the fourth quarter of 2023, we can expect a 25% reduction over the last 18 months." This prognosis is confirmed by the Norwegian pension fund's 2023 results.

"For our private real estate portfolio, 2023 will mark the worst year on record, with a total negative return of minus 12%," added Holstad, confirming in passing that the value of NBIM's real estate assets, €26.3 billion at year-end 2023, or 1.9% of the total portfolio, is down for the sixth consecutive quarter. "Since the peak in Q2 2022, the value of our private real estate portfolio is down minus 22 %," she added. "Our portfolio has been well positioned but not at all immune towards the market backdrop and the structural changes going on in the office sector, in particular in the United States."

"In France, NBIM's portfolio is confined to the most prime locations in the capital," said Guilain Decrop in December. However, despite this underperformance from a capital point of view, the Paris portfolio was still in excellent shape from an operational point of view, he added to BiTV. "Vacancy rates in our portfolio have never been so low, the rents we are signing for renewals or new leases have never been so high, and our tenant retention rates are excellent".

On a global scale, Holstad also notes "a positive trend in the rental markets across most of our holdings, except in the United States where increased vacancy is still" challenging. However, given the continuing uncertainty in property markets around the world, she was reluctant to comment on a possible rebound, believing that "it is hard to predict when this falling trend will turn".