UNITED STATES - ING Clarion Partners has predicted there will be no quick recovery of the US real estate markets.
In a report, entitled US view: Real Estate Investing in a Time of Uncertainty, David Lynn, managing director at ING Clarion said "we feel that the real estate markets in [the US] will likely remain under stress at least into 2010".
ING argued a good indicator of the problems now faced in the property market can be seen in the direction of cap rates attached to core assets as the real estate management firm believes cap rates on core properties will move from 7.5% to 8.5% over the next 18-24 months - a big increase considering cap rates were at around 6.1% in 1Q 2007.
These latest cap rates predictions are based on the current net operating income properties produce, though Lynn noted there are two kinds of distress in the marketplace today.
"One is with capital distress, which involves a lack of capital on both the debt and equity side for transactions," said Lynn. "But there also is distress with the properties themselves. The value of properties has dropped in many cases as much as 30- 40%," he added.
Despite the problems this creates, the rising cap rate could create some good opportunities for distressed investment investors, according to Lynn.
"This situation is going to create very good deals for capital sources which can provide either debt or equity to a transaction," he suggested.
That said, Lynn commented that all of the main property types have been affected by the economic downturn.
"Office, industrial, retail and apartments have all felt the impact of the economic difficulties and will continue to struggle at least until the start of 2010."