AUSTRALIAN super funds and listed property trusts are expected to start migrating cash to offshore markets in the coming year as managers seek higher-yielding investments.
But the outflow will be more targeted than in previous years and more likely to involve a joint venture partner, LaSalle Investment Management said.
Its head of research and strategy for the Asia Pacific, Paul Guest, said demand for core opportunities had not diminished over the past few years and it was projected to grow as Asian pension, insurance and sovereign wealth funds expand their allocations to real estate.
LaSalle has about $US2 billion ($1.91 billion) of office, retail, residential and hotel assets under management in Australia, with its two biggest being the Novotel Melbourne on Collins and Australia on Collins, valued at $204 million, 179 Elizabeth Street, and the Sofitel Wentworth hotel, Sydney.
"This is making core [assets] more expensive, but for certain investors the entry price is worthwhile, given the quality of the income stream," Mr Guest said.
"This demand can also make value-add strategies attractive, by restoring quality income streams through active asset management."
Mr Guest said the weight of money in the country from superannuation funds was expected to force investors to look overseas.
He said he doubted it would be the same as the last boom, when trusts all went offshore with mixed results, but said the low interest rate environment in Australia would force some funds to seek alternative, higher yielding investments.
"I expect there to be more joint ventures undertaken with overseas investors, such as Goodman Group, for example, has done in Asia," Mr Guest said.
The associate director of research and strategy at LaSalle, Alexandra Gray, said the changes in the superannuation contributions would see more cash flow into the property sector.
"It will be a gradual process but we believe Australian fund managers will look to go offshore. These managers need to be flexible," Mr Guest said.
Ms Gray said the big Asian and US investment funds would increase competition in the region as they also chase the higher yielding assets.
She said that in Australia, the best opportunities were in the repositioning of Grade B offices in the CBDs.
Pricing of core assets remained sharp, making investors open to a slight widening in the definition of core. The secondary opportunities were in risk capital for development projects.