UNITED STATES - With the US entering the worst recession for 25 years, "the US real estate market may reprice by up to 30% following the correction of 10-20% that has already taken place," Michael Pralle, CIO and COO of US-based fund manager JER Partners, has told IPE Real Estate.
A new report entitled US Distressed Markets: real estate opportunities in the US and authored by Pralle suggests there will be more distress next year and the year after.
"There will be a lot of motivated sellers due to broken development deals," he said, adding "this is a period of extraordinary opportunity across the board in the US".
Pralle added: "The UK is under even greater stress than the US due to its greater dependency on financial services."
JER Partners has also just published an investor survey which indicates transparency is a pension fund's second most important factor when selecting a manager.
"In a market like this, when returns are under pressure, transparency becomes that much more important to investors," Pralle said.
When asked what the biggest lesson for investors would be from this crisis, Pralle said: "You want to be in a place where you are not forced to sell in a market like this. The less leverage you have the more able you will be to hold through the market cycle."
Pralle also spoke of the changing nature of real estate as an asset class.
"Due to more rapid cross-border flows of information and capital there is more linkage and correlation than people thought, thus the case for global diversification is less valid than it was," said Pralle.
"Investors should still diversify but they will not get as much benefit from it," he added.