A three-year trend of loss and gloom may be lifting at last, according to the Emerging Trends in Real Estate 2011report, released Wednesday by PwC US and the Urban Land Institute (ULI). Respondents to the survey indicated that their performance expectations were lowered; they now look for core property returns in the high single digits, and returns in the mid-teens for investments that carry higher risk.
According to the report, “lenders with strengthening balance sheets finally step up foreclosure activity and dispositions of properties during 2011 and 2012, helping values reset 30-40% below 2007 peaks.”
Mitch Roschelle, partner, U.S. real estate advisory practice leader at PwC, said in a statement, "The market is predicting extreme bifurcation as the capital flight to quality creates a greater separation between the trophy and less desirable assets. Well-located and well-tenanted properties that can generate strong cash flow over the next several years are exactly what buyers and lenders want, according to survey respondents. As a result, prime apartments and office buildings in gateway cities are generating the most attention from the increasing pent-up sidelined capital."