Super funds, in particular self-managed super funds (SMSFs), will lead a surge in demand for unlisted office, retail and industrial real estate assets in 2011, according to Charter Hall Direct Property.
The sector will see higher than historical average returns, with strengthening retail sales and improving economic and employment figures to push retail rents higher, Charter Hall stated.
Unlisted property is suited to SMSFs due to their long-term outlooks and desire for income certainty, and SMSFs account for 75 per cent of the inflows to Charter Hall Direct Property’s funds, said chief executive Richard Stacker.
“With relatively low growth forecast in equity markets over the next few years, many investors are investing for income. Direct property, with its income growth built into lease structures, should be a good vehicle for investors to achieve this,” he said.
Super funds, which typically allocate around 10 per cent to property, will also have an increasing appetite for property due to the strong economy and good property market fundamentals, according to Charter Hall.
Expected growth in the superannuation sector from $1.3 trillion to around $2.5 to $3 trillion by 2020 will also increase the demand for property assets, Charter Hall stated.
As managers merged or sold assets, liquidity was returning and creating exit strategies for investors in frozen funds, according to Charter Hall.
“Property is still an important component in portfolio construction. However, we still have a way to go in educating advisers about the role of unlisted property in an investors’ portfolio and how newly developed funds have addressed these challenges,” Stacker said.
Charter Hall predicted strong growth for retail property despite the increase in online shopping and recently launched an unlisted retail property fund aimed at high-net-worth and SMSF investors.
The Charter Hall Direct Retail Fund has an initial portfolio of six properties with a total value of $177 million in the eastern states with major retail tenants. The fund received a ‘recommended upper end’ rating from Lonsec.
