Outsized amounts of available capital, exceptionally low interest rates and the resulting low capitalization rates have put downward pressure on real estate returns in the United States — albeit to more rational and normalized levels, especially in the prime 24-hour gateway cities. As the Urban Land Institute’s 2013 Emerging Trends in Real Estate forecast points out: “Real estate looks more like ‘the income vehicle’ it was meant to be,” and total returns in the 6 percent to 10 percent range compare extremely favorably to stock and bond alternatives.

Capital chasing higher yields, meanwhile, also edges noticeably into higher-risk secondary and tertiary markets as well as investing in greater numbers of B- and C-quality properties. In examining the capital stack for the best risk-adjusted returns, core real estate appears priced to disappoint at current lofty levels given sluggish improvement in tenant demand for space. The more