Pallister feels Modric is the ideal player to replace the retired Paul Scholes at Old Trafford.
"There seems to be an impending feeling that Modric is going to move and for me he would be an ideal replacement for Scholes," Pallister said.
"The imagination and vision he brings to the midfield makes him a target. He can also score wonderful goals as well, which is part of Scholes' make-up.
"He maybe doesn't tackle as ferociously as he does but he is a terrific talent.
"I'm sure there are a host of clubs who would love to sign him and I'm sure Harry (Redknapp) would love to keep him."