NETHERLANDS - Dutch pension funds will ditch bricks for funds, according to Peter van Gool, deputy director of real estate at Dutch pension fund SPF Beheer.

Describing recent market performance as “unsustainable”, he told the IPE Investor Forum in Amsterdam on Thursday: “I think we are at the top of the market.”

He said: “Real estate brokers say: ‘Don’t worry. Sleep well.’ What they’re saying effectively is that yields will be strong and risk will fall. I’d like to believe it but it isn’t true. It will end.”

The comments came as a benchmark analysis from Research Worldwide showed real estate on 16 out of 18 global bourses reported negative growth in May. Singapore and Tokyo suffered the worst falls, although exchanges in the US (-3.02%), Sweden (-8/37%) and the UK (-3.30%) also showed significant corrections.

In a largely pessimistic prognosis for direct property investment, van Gool said brokers were pointing to growth in construction but underplaying high vacancy rates. “We have beautiful offices here in Amsterdam – but half of them are vacant,” he said.

He also urged pension funds to exercise caution investing in global real estate, describing the trend for greater allocations in global markets as “problematic” and pension funds in danger of repeating the mistakes of the 1980s.

“In the 1980s, Dutch pension funds tried to manage global portfolios and it turned out to be a disaster,” he said. “Do you have enough exposure to reduce the individual risk of several buildings? With one shopping centre in Germany and an office block in Paris, you have very specific risk and you need at least 30-40 of them to reduce the risk.”

In a subsequent question-and-answer session, Hans-Wilhelm Korfmacher, managing director of German pension fund WPV played down the mooted exodus from real estate.

“I don’t sleep well with this asset class, but I don’t sleep well with other asset classes, either,” he said.

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