GLOBAL - The global real estate recovery will falter in 2011, leading to a rise in yields, before resuming a stronger trajectory in 2012, according to Aberdeen Asset Management.

The fund manager's latest Global Property Market Outlook also predicted a corresponding two-stage recovery in total returns for international real estate investors.

Aberdeen has forecast a strong global economic recovery during the second half of 2010, with GDP rising 3.3%.

Despite contagion fears over the Greek debt crisis, Aberdeen expects the global economy to avoid a double-dip recession, unless there is a major shock, such as an actual government debt default in Europe.

The report said: "We expect global economic growth to slow below trend in 2011. Along with deteriorating capital market sentiment over sovereign debt risks and concerns regarding continued de-leveraging of bank balance sheets, this will generate a second though modest leg down in property returns next year in Europe and North America."

Aberdeen added that a sustainable upturn for global total returns would only emerge in 2012, by which time "occupier demand will have strengthened" and "the rental cycle turned firmly positive", underpinned by a huge contraction in new construction activity.

The highest returns on a risk-adjusted basis - taking into account factors such as the volatility, transparency and economic risks - are to be found in Asia.

"Prime capital values, on a long-term perspective, are low, while the growth outlook is by far the strongest globally," the report said.

"However, within the region, there is considerable dispersion of pricing, with, for example, Hong Kong a relatively expensive market because of substantial yield compression in 2009."

In Europe, the strongest total returns were projected to be in the UK, the Nordic economies and France.

The weakest performers will be Greece, Portugal, Italy, Romania, Croatia and Hungary, hindered by weak economic growth rates, high and rising government debt and modest investment demand, Aberdeen said.

"Although continental Europe offers some of the weakest returns on a global basis, it is substantially less volatile," the report added.

Aberdeen said investors were beginning to look at secondary real estate assets in some of the most popular markets.

Thomas Beyerle, head of global property research at Aberdeen, said: "There are some recent indications investors are now considering value-add and better-quality secondary opportunities as an alternative to prime, especially in the UK, Hong Kong and France."