PGGM puts brakes on Asian property investment

The €277bn Dutch pension fund is slowing allocations to the region as part of a worldwide strategy to combat falling asset prices.
PGGM puts brakes on Asian property investment

Netherlands-based pension fund PGGM is slowing the pace of its Asian property allocations as part of a worldwide brake on new investments in its €18 billion ($19.07 billion) global property portfolio.

Maarten Jennen, a senior director and strategist for private real estate at PGGM Investments, the investment management arm of the €277 billion fund, told AsianInvestor that the need to rebalance its portfolio following falls in its equity and fixed-income portfolios last year, in addition to sharp moves in currencies, meant the fund was slowing down its property investing.

“The allocation is currently above its 6.2% of the total portfolio, which is a bit above target, so, we’re very careful in selecting investments,” he said, adding that currently there was no pressure to sell assets. 

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However, he said write-downs of the fund’s property portfolio – in Asia, Europe and the US – would come in the coming weeks and months as valuation appraisals caught up with market conditions and prices ceased to be influenced by deals agreed in 2021 and early 2022, which gave an artificially inflated picture of valuations.

“This is the same trend we’ve seen in cycles in the past – private real estate valuations lag the market. We expect re-valuations to come in Q4 and the beginning of next year,” he said. 

Jennen said he was seeing slower deal activity in Asia, as elsewhere, as other investors faced the same rebalancing challenges and prices failed to find a new equilibrium balancing the expectations of sellers and buyers.

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“Rising bond rates have created a disconnect in parts of Asia, as in the US and Europe – buyers have different expectations to sellers. The necessary re-pricing is not taking place and there is limited activity,” he said. Although PGGM expected continued elevated interest rates and recessions in many countries, recessions were likely to be “shallow and short”, he added.


Jennen said Japan was an exception to falling activity across Asia.

“In Japan there’s more interest, the yen is low, and the gap between local bond rates and cap rates make it a more positive market,” he said. PGGM has been active in the multi-family sector in the country since 2017, but has avoided investments in the core office sector.

Jennen’s account of falling deal volume in Asia and beyond is borne out by the data from major property companies.

According to the latest global capital trends report published by MSCI Real Assets, a property data provider, on November 3, global investors allocated $33 billion to Asia-Pacific property in Q3, down 38% on a year earlier. CBRE’s Asia-Pacific Q3 data, published on November 13, showed a 20% fall in commercial real estate allocations to the region over the period compared with a year earlier, to $27.3 billion.

The $153 billion allocated to the US in Q3 by global investors was down 21% on a year earlier, according to MSCI Real Assets. The $51 billion allocated to Europe, the Middle East and Africa was down 44%.


PGGM Investments currently has €5.4bn invested in Asia-Pacific, the same amount in the Europe, and the balance, €7.2bn, in the US.

Of the total, roughly half is invested through funds and the other half is through joint ventures, club deals and separate accounts. In Asia-Pacific, the latter type of arrangements cover more than 80% of total assets under management. In non-fund deals, PGGM takes majority stakes of up to 98% and makes major decisions concerning the management of properties, such as those relating to business plans or when and at what price to sell them.

PGGM’s most recent Asian allocation was in June, when it entered a S$1 billion ($746 million) joint venture with Australia-headquartered real estate group Lendlease to invest in a portfolio of innovation and life science-focused property assets in Australia, Japan and Singapore, with the venture acquiring its first asset in the Japanese city of Yokohama.


Jennen said he anticipated a growing gulf in Asia’s office sector between the best offices, boasting the best facilities and commanding the highest prices, and the rest, as working habits changed in the wake of the pandemic.

“Working from home may be less of a theme in Asia for residential and cultural reasons. However, we expect a growing bifurcation – a bigger divergence between good and bad.” he said. As a result, he said the fund was tightening its focus on creating high-quality offices in central locations in the region.

“The office sector faces a lot of questions marks, like retail did a few years ago,” Jennen said.


A key Asian focus for PGGM in recent years has been the multi-family sector. It owns several properties in Japan with a combined value of €850 million, and has started to build up a portfolio in Australia since last year, seeking to develop high-quality buildings in cities where it expects population growth.

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The fund has no fixed plans to expand its residential portfolio beyond Japan and Australia, despite keeping an eye on a sector which is likely to develop quickly in the region, Jennen said.

“There is no new market on the list, but the institutional multi-family sector is coming up in Asia and more countries could be added in the future,” he said.

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