REAL ESTATE - Robin Goodchild, head of European investment at property firm LaSalle, this week urged large pension funds to invest directly in real estate and claimed smaller ones were re-thinking their lack of exposure.
In an online seminar that covered yields, REITs and cross-border investment, Goodchild and Gareth Lewis, director of finance and investment at the British Property Federation, agreed that pointing out that cross-border investment was gaining ground among smaller pension funds worth £50-250m, only half of whom currently have any exposure to real estate.
Real estate was "more liquid than people think", claimed Goodchild.
"Selling property at the moment is very easy. But for someone who's used to screen-trading in a nano-second, a month is a lifetime. In markets that are not as hot as they are now, it'll take even longer.
"If you're big enough to have your own portfolio, and if you have it run by a discretionary manager, the time is no greater than for equities and hedge funds, and you have more control in terms of moving money in and out of the market. Indirect funds have liquidity, but it's a bit more iffy. It needs to be actively managed."
Both said institutional investors were looking for opportunities outside the UK amid increased institutional interest in real estate as an asset class and keen domestic pricing.
Lewis pointed out that the introduction of REITs in January 2007 would increase cross-border investment options for smaller pension funds, as well as retail investors.
"In five years, a pension fund will be able to choose between a whole range of onshore UK-based funds," he said. "The investor's decision would be based on commercial considerations and what kind of return profile they're looking for, as opposed to tax considerations."
Both also dismissed speculation over the imminent collapse in the UK commercial property market.
"Property is reasonably priced; yields are above gilt still; and you're getting a rising income stream," said Goodchild. "The backdrop is a pretty good one and there's no reason why we should see a collapse or yields rise."
Lewis agreed: "There's a consensus that people aren't going to see the stellar returns of recent years going forward but you don't hear many people calling this the top of market," he said. "There's still a lot of money chasing property and there are still plenty of opportunities for people to increase their exposure. The prospects are still good."