LaSalle Investment Management today released the 2010 edition of their Investment Strategy Annual. A publication that provides an outlook for global real estate markets.

The report notes that the plunge in values has stopped in most major markets it follows and sings of increasing investor confidence are beginning to be seen.

LaSalle anticipates a further re-alignment in the pricing of risk with an increase in deal flow as sellers slowly move from denial to acceptance. Investors should seek an appropriate balance between total risk aversion and inappropriate risk tolerance. The former is already resulting in a surplus of capital targeting a handful of ultra-safe deals.

Jacques Gordon, Global Strategist at LaSalle Investment Management said: “Overall, investors in commercial real estate should be cautiously optimistic about the outlook in 2010. However, as a late cycle participant in the general economic recovery, real estate will behave differently from other asset classes. The income streams from leased buildings weathered the global recession in remarkably good shape, but as leases mature in generally weak markets, net operating income will be under downward pressure in many countries for several years to come.”

“At the same time, in terms of stimulus packages and bail outs, commercial property has been treated quite differently from residential real estate, banking and other industry sectors. And private equity prices have not yet recovered as robustly as stocks or bonds. All these differences mean that real estate’s diversifying power in a portfolio will be restored.”

The firm goes on to state that in 2010 investors can look forward to more rational pricing and, in cases of distressed properties and owners, some hugely interesting opportunities. As they develop investment strategies for 2010-2011, investors with a clear view of the returns they require can take full advantage, says LaSalle.

William Maher, Head of US Strategy, LaSalle Investment Management said, “Investment opportunities in North America will improve but are likely to remain limited in 2010, particularly in the United States and in Mexico. In the US, the best opportunities, both core and higher return, will evolve from the resolution of the large level of maturing and failing loans.”

La Salle go on to recommend that investors in the US focus on low-risk re-priced core properties. A large number of opportunities are expected to emerge from the problems caused by the excessive leveraging of the real estate sector over the past five years.

As regards high return strategies, the areas to focus on include distressed debt (public and private) and a wide range of structures that focus on the provision of “rescue capital” to private real estate funds, developers, individual assets, and lenders.

Not surprisingly, the major risks to Commercial Real Estate according to the report is with the capital markets, which are expected to be the main driver of performance, while economies are weak. Real estate capital markets could be quite volatile in the years ahead, says LaSalle. The unintended consequences of monetary and fiscal stimulus policies could lead to too much money flowing back into property ahead of a solid recovery in fundamentals. This excess liquidity risk is already building in China and, to a lesser extent, the UK. To manage this risk, investors should maintain a strict discipline that focuses on achieving a required return with realistic and diligent underwriting.

Equity Interface is an online real estate investment service designed to connect developers and accredited investors. By offering unparalleled research tools and information, Equity Interface empowers members to discover mutually beneficial real estate opportunities. For more information, please visit www.equityinterface.com