- July/August 2011: Vol. 23 No. 7

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Slow and Steady: Expect Modest Improvements in the Property Markets

by Mike Sobolik

More than a year has passed since the start of the institutional real estate recovery, and market conditions have indeed turned a corner. A recovering economy with hardly a hint of imminent construction established a floor for fundamentals last year and spawned a surge in capital raising that breathed some life back into the transaction market. With property offerings limited and government bond yields marching downward for much of 2010, capital competed intensely for prime assets, creating positive momentum for values and driving down cap rates by more than 100 basis points in some segments of the market.

Now we stare into the second half of 2011 and 2012 and find ourselves confronted by a number of important questions: What level of strength can we expect from this economic recovery? What factors will drive income growth across property sectors? Will real estate cap rates increase? Will improving fundamentals attract investor capital and support value appreciation, even if

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