Global investor pivots away from office, industrial and retail toward new property sectors
Norway’s massive sovereign wealth fund is revamping its real estate investment strategy as long-term changes driven by remote work and online shopping continue to transform property markets worldwide.
Norges Bank Investment Management, which oversees the world’s largest sovereign wealth fund, announced plans to expand beyond its traditional focus on office, industrial and retail real estate. Going forward, the fund intends to increase exposure to residential assets, data centers and life sciences properties.
The shift reflects what Norges described as “structural headwinds” facing office and retail sectors due to the rise of remote work and e-commerce, along with the higher operational demands of those property types. As part of the overhaul, the fund plans to move away from primarily owning buildings directly and instead adopt a more flexible approach that includes investments through funds and operating companies, rather than partnering on single-asset deals.
The move by one of the world’s most influential institutional investors underscores a growing belief that pandemic-era changes in how people work and shop are here to stay. Norges’ decision to reduce emphasis on office and retail assets could have ripple effects across global commercial real estate investment strategies.
The $2.1 trillion fund currently holds $35.8 billion in real estate assets across more than 1,300 properties in 14 countries. Its portfolio includes over 600 office, industrial and retail properties in the United Kingdom, along with roughly 500 mainly office and industrial assets in the United States.
“Our peers have successfully adjusted to these shifts by increasing allocations to emerging property sectors,” Norges said in a statement. The fund noted that many large investors are increasingly blending direct ownership with platforms and funds to gain access to specialized operational expertise more efficiently.
Under the revised strategy, indirect investments may involve multiple entities with different roles, such as one company focused on development and acquisitions and another dedicated to owning and managing stabilized assets. Norges said it plans to use this structure particularly for residential and data center investments.
Norges declined to comment further in response to questions from CoStar News.
The fund emphasized that its global reputation allows it to partner with top-tier operators and negotiate favorable terms while maintaining influence, even when investing indirectly.
Its long-term investment horizon also gives it a competitive advantage, Norges said, enabling the fund to hold assets based on value creation rather than fixed exit timelines and to remain patient through market cycles.
Retooled real estate portfolio
Norges began investing in real estate in 2010, but said the sector has since undergone “fundamental changes.” Its earlier approach concentrated on a narrower set of sectors, regions and investment structures. The updated strategy is designed to better leverage the fund’s scale and flexibility to access opportunities across a broader mix of property types and geographies.
Under the new allocation framework, office, retail, logistics and residential properties are expected to make up between 15% and 35% of the real estate portfolio. Emerging sectors, including data centers and life sciences facilities, are projected to account for 10% to 25%.
Regionally, the fund anticipates that 30% to 70% of its real estate investments will be in North America, 20% to 60% in Europe, and less than 15% in Asia-Pacific and other emerging markets.
The strategy update also comes with leadership changes. Jayesh Patel has been appointed co-head of European real estate investing, according to his LinkedIn profile, sharing the role with Guilain Decrop.
Patel joined Norges in 2015 and became head of U.K. real estate in 2016. His previous experience includes roles at Sabal Financial Group, Aerium Finance and Deloitte.
Source: Original reporting by Mark Heschmeyer, CoStar News.
