U.S. real estate returns are expected to drop within two years to 5% overall and 4% for core investments, according to LaSalle Investment Management's 2006-2008 Investment Outlook report. Consultant Townsend Group expects real estate to return 9% in the next 12 to 24 months. By comparison, the NCREIF Property index returned 19.18% for the year ended Sept. 30. Some 60% of the index is invested in core real estate.
Returns of U.S. real estate investment trusts are also expected to be in the single digits in the long term. The NAREIT Composite index returned 22.63% for the year ended Sept. 30, said Jacques Gordon, international director, investment strategy for LaSalle.
At the same time, executives at LaSalle do not foresee price bubbles forming in real estate, with the exception of some housing markets, because they do not anticipate a total collapse in values in U.S. commercial real estate, he noted.