GLOBAL - The bricks and mortar property industry is ill equipped to deal with the future switch to defined contribution (DC) because of liquidity requirements, according to Simon Mallinson, research director at Invesco.

Mallinson told the IPD multinational investment seminar last week that $200bn (€159bn) would be available to invest in mature markets over the next five years - but he suggested investors could struggle to place it.

One consequence of the shift from defined benefit (DB) toward DC pension schemes will be a requirement that they invest in liquid funds with daily pricing, he told IPE Real Estate this week.

"There aren't many funds that can take DC money," he said.

"There are funds in development, but there aren't that many funds out there to deal with the change.

"It's a challenge the industry needs to address - it might become a problem sooner than they think."

Sovereign wealth funds are looking to place capital quickly, which could force them toward infrastructure rather than traditional real estate, Mallinson said.

"If they do invest in real estate, rather than infrastructure, they have allocations of $20bn to place over a period of five or seven years," he added.

"They'll be looking at shopping centres or city-centre offices - large lot sizes in single chunks."

Mallinson pointed out that sovereign wealth funds were starting from a low base of real estate exposure and still in the process of developing their property investment strategies.

The latest to enter the property market is the Norwegian government pension fund, which recently announced it would allocate NOK140bn (€16.6bn) to real estate.

The NOR2.6trn scheme initially said it would invest only in mature markets and traditional sectors through indexed, non-listed funds.

However, many observers - including Elroy Dimson, professor emeritus at London Business School, who advised on the fund's real estate strategy - believe the fund will be forced to invest directly because of the sheer size of its 5% allocation.