No pension fund owns only commercial real estate. If anything, it's like 5% of their entire portfolio. Still, it's not necessarily a problem.
So in your simplified scenario, you have a pension paying retirees that owns 100% of a building. Say few businesses want to lease space in the building, and the value goes down.
They don't have to sell the building. They can just refurbish it and put the retirees in it. That's actually more tax efficient than paying the retirees who then pay their retirement home.