The markets in the top 10 to watch are Denver, Washington, New York, San Francisco, Boston, Seattle, Houston, Los Angeles, San Diego and Dallas.
The “Emerging Trends” study is based on surveys of more than 1,000 commercial real estate experts, including investors, developers, lenders and brokers.
Looking at the United States as a whole, the study found “hopeful signs of tempered commercial real estate market improvements” for next year. Commercial properties include office, industrial, retail and apartment buildings.
Survey respondents expect high-single-digit returns for high-quality, core assets, according to the study. They think lenders with strengthening balance sheets finally will step up foreclosure activity and property sales in 2011 and 2012. Stronger real estate lenders also are expected to increase lending next year.
Property owners whose buildings have high vacancies and lower rents may have trouble with the credit markets, and even face foreclosure.
Well-located properties with strong tenants that generate good cash flow will be most attractive to investors over the next several years, the study says. Prime apartment and office properties already are getting the most attention.
The best advice to investors for 2011, from survey respondents, includes:
• Temper expectations, and buy well-leased core assets.
• Lock in leverage; mortgage rates can’t get much lower.
• Focus on global “gateway” cities — 24-hour markets — including coastal cities with international airport hubs.
• Buy land; it won’t get any cheaper.
• Be cautious with distressed loan pools. They could be a recipe for disaster if assets aren’t underwritten properly.