More than 50% of investors intend returning to commercial property investment, says Charter Hall survey

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Most investors intend to increase their exposures to listed and unlisted property over the next year, and will invest sizable sums, according to the findings of a new Charter Hall Group (ASX: CHC) Investor Forum survey. In a sign of renewed confidence in the sector following the GFC, the survey of nearly 400 Self Managed Super Funds (SMSF) trustees and individual investors from Australian capital cities, found 55% intended to re-enter the property market over the next 12 months.

David Harrison, Managing Director of Charter Hall, said the positive retail investor sentiment to commercial property shown in the survey was very encouraging, and called for investors to follow the lead of savvy institutional investors who are taking advantage of emerging opportunities in the listed sector (where REITs are trading at a discount to NTA) and also in the unlisted (direct) property sector.

The Charter Hall survey found 60% of those intending to invest in the next 12 months planned to invest sizable sums of more than $50,000. The survey showed 36% of respondents favoured listed property, another 11.71% favoured unlisted (direct) property while 6.35% favoured residential property.

“We believe the commercial property market has reached the bottom of the cycle post GFC and for investors considering their re-entry to this sector, now is the time to do it to take advantage of property values we expect will continue to rise.

“Charter Hall is hearing reports from our agencies that institutional investors such as superannuation funds, high net worth individuals and syndicators are in the market looking for homes for mandates up to and in some cases in excess of $1 billion as confidence returns,” Mr Harrison said.

Overall, investors surveyed had a conservative allocation to commercial property with 47% of those holding a less than 10% allocation in their portfolios. Respondents also showed a strong preference for office space, with one third of investors preferring this sector.

Mr Harrison said the strong preference for office space suggested retail investors may be overlooking opportunities available in the retail and industrial sectors which are also expected to perform strongly owing to attractive characteristics such as lower volatility and higher prospective returns.

“Institutional investors are returning to the market on the strength of excellent buying opportunities, in a climate of reduced competition and rising tenant demand in the industrial space. Retail investors should
take the lead set by institutional investors as a reference point for their own portfolio allocations,” Mr Harrison said.

The CEO of Charter Hall Direct Property, Richard Stacker echoed Mr Harrison’s comments saying successful capital raisings by Charter Hall this year confirmed investors’ return to the market.

“Since January this year, Charter Hall Direct Property has raised more than $110 million in capital for the since closed Macquarie Martin Place Trust; the open Stirling Street Trust; and the Charter Hall Direct Industrial Fund. The success of these raisings is confirmation of increasing investor appetite and our ability to offer retail investors access to institutional grade property at the right point in the cycle,” Mr
Stacker said.

The survey found that investors’ primary motivation for investing in real estate was regular income with 43% citing this as their number one driver. Mr Stacker said retail investor demand for income was a key
consideration in the development of Charter Hall Direct Property’s Direct Industrial Fund (DIF) launched in July this year.

“We developed DIF in response to demand from advisers, investors and in particular SMSFs, looking for simple products that deliver steady income over the long term.

“The survey results show the fundamental characteristics of unlisted property, which include reliable income and capital preservation on a long term basis, continue to be attractive to retail investors and
SMSFs,” said Mr Stacker.

Reflecting the defensive investment strategies taken by many investors during the downturn, investors also revealed significant holdings in cash and term deposits with nearly one third of respondents holding more than $200 000 in these assets. However, investors also signalled their rising confidence with 74% of those surveyed believing the Australian sharemarket would rise in the medium term.

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