Demand from investors for unlisted property is expected to increase throughout the course of this year as the property sector is likely to provide higher than historically average returns, according to unlisted property fund manager Charter Hall Direct Property.
The group said superannuation funds and in particular self-managed super funds (SMSF) were expected to lead the surge in demand for real estate across the major sectors of office, industrial and retail assets.
"We expect SMSF appetite to grow as their long-term outlook and appetite for income certainty and capital preservation is ideally suited to unlisted property, particularly retail property which is underpinned by major brand tenants," Charter Hall Direct Property chief executive Richard Stacker said.
"With relatively low growth forecast in equity markets over the next few years, many investors are investing for income, and direct property, with its income growth built into lease structures, should be a good vehicle for investors to achieve this."
Stacker said Australian super funds, which typically allocate around 10 per cent to real estate, were also anticipated to have a growing appetite for property due to the strong economy and good property market fundamentals.
He said demand for property exposure was also expected to increase, in line with inflows into superannuation, which were expected to grow from funds under management (FUM) of $1.3 trillion in 2010 to FUM of $2.5 trillion to $3 trillion by 2020.
"The positive outlook for property fundamentals and demand for investment grade property should apply upward pressure on capital values, contributing to strong total returns for investors," the group said.
"Challenges in the unlisted property sector, including some funds still with distributions on hold and high gearing levels, are also dispersing as managers sell assets, merge with other funds or managers, and start to provide some liquidity and exit strategies for investors."
