Back in September, we pointed out that assets managed by Norway's sovereign wealth fund had surged to over $1 trillion after they made the controversial decision to increase their exposure to global equity bubbles. The move has worked out perfectly in the short term, though we still have our doubts as to whether the "greater fool" theory works over the long term...certainly, it never has before but maybe this time is different.

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Alas, as Bloomberg points out today, bubbles in equity markets aren't the only ones to have attracted the attention of Norway's wealth management team which is scooping up commercial real estate projects all over the world, despite their own acknowledgment of "red flags."

There may be worrying developments in some property markets, but the world’s biggest sovereign wealth fund says it has no intention of pulling back from real estate.

A gap is opening between what stock-pickers think real estate is worth and what assets could be worth in the physical market, a potential sign that a correction could be looming. For example, the largest real estate investment trust in the U.K., Land Securities, now trades at a 36 percent discount to net asset value.

“It’s clearly a red flag in pricing if anything is too far off in any direction,” Karsten Kallevig chief executive officer of Norges Bank Real Estate Management, said in an interview at his Oslo office on Wednesday.

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So where are the Norwegians looking to lease you some office space?Well, only in "prime spots" like New York's Times Square...

Kallevig, 43, now oversees $24 billion in key real estate, including much of London’s Regent Street, as well as properties on Times Square and the Champs Elysees, among other prime spots. Overall, the fund holds about $1 trillion in stocks, bonds and real estate, and is in the process of building its property holdings to about 7 percent of its total portfolio.

So far, the fund still has an appetite for new acquisitions. “I haven’t pulled back mandates, that’s for sure,”Kallevig said.

After splitting off from the rest of the fund’s benchmark portfolio and increasing its scope to buy real estate last year, Kallevig is expanding his internal top management team. In September, he appointed two new chief investment officers to oversee the U.S. and European markets.

The fund’s strategy is to focus on about 10 global cities. The new CIOs see similarities in Europe and the U.S., and are competing with largely the same bidders on both sides of the Atlantic for the most prestigious properties. “It’s the same type of names we’re seeing across all our markets, the deals that we target are relatively large,” Per Loken, who’s in charge of the U.S. markets, said in an interview.

Of course, they may want to take note of the tiny surge in commercial real estate capacity in New York that has recently resulted in massive tenants like Ernst & Young abandoning their 1 million square feet of office space in Times Square in favor of something in a less touristy area of town.

The most recent is Ernst & Young LLP. Its departure from 5 Times Square, announced this month, may leave the tower’s million or so square feet of office space empty. The neighborhood’s effective office rents -- the rents that tenants actually pay, after concessions -- have fallen by 1 percent annually for two years, according to CoStar Group Inc., a research firm that tracks office leasing.

One problem is a rise in tourism and a proliferation of panhandlers. Some are dressed as Elmo and Spider-Man; others, like the “desnudas,” are hardly dressed at all.

“It’s not ideal to wind through costumed characters on your way to work,” said Lauren Baker, New York City market analyst for CoStar. “There’s so much noise and commotion.” The neighborhood “obviously isn’t ideal for professional tenants,” she said.

As a study released last month by the New York Building Congress noted, a massive supply glut of new office space flooding the city has certainly made it easier for large firms like E&Y to find great deals.

The non-residential sector, which was responsible for 32 percent of all New York City construction spending in the decade between 2006 and 2015, accounted for 41 percent of all spending in 2016. The only other time over the past two decades that non-residential accounted for such a large share was 2010, when the rebuilding of the World Trade Center was at its peak and billions of additional dollars were being invested in the new Barclays Center and the renovation of Madison Square Garden.

At the moment, the primary driver of non-residential spending continues to be office construction, which is at its highest levels in three decades. The Building Congress estimates that 15 million square feet of office space will be completed in Manhattan alone during the three-year forecast period, with an additional 2 million square feet of office space anticipated for completion in the boroughs of Brooklyn and Queens.

On the bright side, at least Norway will be able to offer new tenants a first-row view of Times Square's "desnudas" and other charming panhandlers.