The chairman of the University of Southern California's Lusk Center for Real Estatecolor> in Los Angeles predicts that despite continued weakness in commercial property values and cash flows, "real estate will continue to attract capital" next year.
"Compared with other fixed-income investments, real estate will be the asset of choice," Stan Ross color> said in a press release issued Thursday.
High-net-worth individuals, pension funds, opportunity funds, syndicators, foreign investors, real estate investment trusts and others will all continue to allocate substantial capital to property investments, Mr. Ross said.
"At 6% to 8% currently," he said in the release, "real estate yields are the lowest in a decade, but they offer a premium over other fixed-income investments," such as U.S. government and corporate bonds.
But he warned that real estate still carries risk. For example, it is unclear what interest rates will do, and if they keep rising "companies with substantial floating-rate debt will be squeezed as their borrowing costs increase faster than their property income."