US - Property returns in the US will remain positive for the rest of 2011 but drop off significantly next year, according to a survey of 22 Pension Real Estate Association (PREA) members.

PREA's quarterly consensus forecast of NCREIF Property Index performance found an anticipated average of 12.4% full-year returns from the index for 2011. Fourth quarter returns, although still positive, would be below those of the first three quarters, according to the poll.

Residential is the sector to beat, the report added, delivering 14% in 2011, 9% in 2012 and 8.5% in 2013. The average annual residential return to 2015 is forecast to be 9.7%.

"While apartment [residential] has, like the other sectors, shown a trend of downward revisions in 2012 forecasts, the effect is more muted," the report said.

"It seems that despite the strong performance over the last 2 years in that sector, belief in the potential of the apartment sector continues to hold up relatively well."

However, investors polled believed lower capital appreciation across sectors next year would pull down full-year results to 7.9% - below the long-term average. Returns on retail will decrease least, compared with falls of 550bps for office and industrial.

Despite less optimistic forecasts for next year, the report's authors were keen to point out that investors did not expect a reversal in the market; returns next year would continue to be "relatively healthy".

"With 10-year Treasury yields hovering around 2% and significant equity market volatility, the returns projected by the average forecaster for commercial real estate, an asset class traditionally exhibiting low volatility, may appear quite attractive to many investors," they said.

In separate US news, Dubai Investment Group has awarded a mandate to the former Lehman Brothers team at Silverpeak to "maximise recoverable proceeds" from a $1.1bn (€832m) US and German commercial portfolio.

The portfolio, acquired between 2004 and 2008, comprises 30 assets across hotel, office and retail, primarily in the US.

Silverpeak, which grew out of Lehman Brothers Real Estate Partners, has hired Anthony Juliano, previously head of Europe and the US at Dubai Investment Group, to manage the portfolio.
 

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