GLOBAL - ING Real Estate Investment Management (ING REIM) has predicted that the highest unleveraged returns from commercial real estate over the next five years will come from markets in the Americas.
The fund manager has set out the case in its quarterly Global Vision report, stating that steep falls in values during the crisis may provide opportunities in distressed sales and lead to mispriced assets emerging in 2011-14.
Timothy Bellman, global head of research and strategy at ING REIM, said: "Real estate markets worldwide are likely to prove attractive to many types of investor in the 2011-14 period, especially due to the income return.
"Variations in the speed, scale and timing of the recovery across real estate markets present a global or cross-border investor with a range of opportunities and scope for risk diversification.
"Against this background, the Americas will probably offer the best chances for the highest unleveraged returns."
The report pointed at forward indicators in the US real estate market that imply transaction yields are declining and concluded this would feed through into the benchmark NCREIF and IPD indices in the near future.
The Moody's repeat sales index also suggest that transaction prices have recovered 8.6% since the low point in mid-2009, although this still places them approximately 30% lower than during the mid-2007 peak.
But ING REIM also highlighted figures from the MIT Center real estate transaction index that show prices for commercial properties sold by major institutional investors increased by 17.3% in the second quarter, although these were based on a low level of transactions.
The fund manager said a strong rebound in values of prime properties appeared to be triggered by lower cap rates, driven down by strong investor demand for a limited supply of suitable product.
The resource-rich markets of Brazil and Canada were also enjoying a relatively positive economic outlook in the Americas, the report added.
In contrast, with relatively weak short-term economic prospects, European real estate returns are likely to remain broadly stable, ING REIM said, while there would be opportunities for robust returns in Asian markets.
Bellman said: "Generally, global real estate markets remain on a path to recovery.
"This is despite an expected prolonged period of weak and choppy economic growth as the world grapples with the scale of deleveraging necessary to restore the health and balance of its financial and economic systems."