High prices and low yields in major cities are driving investors to second- and third-tier markets.

A majority of investors in a new survey expressed cautious optimism in the U.S. real estate market in 2016, KPMG reported Wednesday.

Ninety-one percent of senior executives polled August through October said they expected real estate fundamentals to be about the same or better during the year ahead.

However, they were less bullish than in the previous year’s survey, suggesting, KPMG said, they believe the U.S. economy will start to slow.

They voiced concerns about the implications of rising interest rates and geopolitical risks.

“The respondents are understandably unsure if the pace of Fed rate increases will take away the punch bowl,” KPMG’s chief economist Constance Hunter said. “Although the U.S. will face global headwinds, domestic demand looks strong enough to keep the economy growing in 2016 at a 2.5% rate.”

The survey found that investors were taking fewer risks and adjusting their portfolios in preparation for the flattening or downturn ahead.

The poll results showed investors were looking for less risky opportunities, for instance, by shifting from ground-up condo development to urbanization-driven multifamily properties that might not have as significant a downturn.

Health care development should also experience major investment in 2016, thanks to increased demand from aging baby boomers. Fifty-three percent of respondents expected “significant” growth in this sector.

Executives surveyed fretted that available capital far exceeded opportunities to put it to use, a trend that has driven up prices in primary markets and forced investors to look elsewhere.

A chief cause of this capital surplus is the big inflow of foreign capital into the U.S., where investors can avail themselves of more opportunities than they can find abroad. Seventy-four percent of respondents expected increases of foreign flows this year from around 5% to more than 20%.

KPMG said inflows were likely only to increase following the recently passed reform to the Foreign Investment in Real Property Tax Act.

The survey findings showed that many investors were focusing on real estate fundamentals, and seeking incremental returns in the form of yields instead of depending on market movements to profit on transactions.

Investors were using easy access to equity and debt in the “hunt for yield” in a variety of assets and markets, KPMG said.

Sixty-six percent of executives surveyed said the inability to find investments was the main threat to their business model in 2016.

KPMG noted that gateway cities were experiencing ultra-high prices and strong competition, which was driving down yields. As a result, many investors were looking to second- or third-tier cities for higher returns and development deals.

Cybersecurity threats are on everyone’s mind these days, but a significant number of respondents told KPMG that they did not have a written cyber incident response plan and were not prepared for such an event.

Seventy-nine percent of the biggest firms, those with more than $10 billion in assets, had a response plan and were prepared for an attack. In contrast, 81% of those with less than $500 million in assets said they did not yet have a plan, and 63% said they were unprepared.

— Check out Warning: Don’t Party Over This Market Rally, BlackRock’s Koesterich Says on ThinkAdvisor.