COMMERCIAL REAL ESTATE : Pension Funds to Up Investments in Real Estate, Survey Shows
A survey of about 60 corporate and public pension funds and pension fund advisers by the Price Waterhouse Real Estate Group in Costa Mesa found they planned to double their investments in real estate this year over 1991 levels.
The good news is that pension funds--longtime investors in stocks and bonds--may help to fill the vacuum left by the retreat of banks and insurance companies from real estate lending.
The bad news for office developers is that most of this new source of financial backing will go toward residential building.
According to the survey, pension funds would rather lend to apartment and home developers than to industrial, retail and office developers.
Loans from the real estate industry’s traditional sources--commercial banks, savings and loans, life insurance companies and mutual savings banks--have dropped dramatically in the 1990s.
“Partial data for 1991 indicates the total amount in outstanding commercial real estate mortgages (including loans to apartment and home builders) held by the traditional lenders is shrinking at a rate of $4 billion a year--a sharp reversal from the 1980s, when the mortgage pool grew by $58 billion per year,” said Dennis W. Macheski, director of real estate research for Price Waterhouse.
The waning presence of the traditional lenders has left a big gap. The Price Waterhouse survey of the nation’s 450 largest lenders and investors--from banks to insurers to pension funds--showed a 33% decline in real estate investment and a 47% decline in real estate lending in 1991 from a year earlier.
Historically, pension funds have played only a minor role in commercial real estate lending. Rather, they generally made equity investments in existing projects or development.
