Although return expectations will further recede, well-leased core real estate in leading markets will continue to produce solid single-digit, income-oriented returns, according to the Emerging Trends Americas report.

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Following are the top five United States markets, as ranked by survey respondents for Emerging Trends Americas:

Washington, D.C. The rock-solid D.C. market may cool down if the government ever shrinks. Development activity will rev up and torrid cap rate compression will force buyers to swallow awfully hard. Results from 33 years of Emerging Trends make it clear that no other market performs better during a recession, and the area’s jobs base has diversified well beyond just government and lobbying into technology, communications, and biomedical industries. Office vacancies will level off in the high single digits, and a shortage of large blocks should force rents up in Class A space. More national retail tenants will want a presence in the market. Apartments and infill housing may do better here, too; home prices should recover ahead of those in other cities.

Austin. The interest in Austin proves that investors are looking way beyond the global pathways. This moderately sized city features all the other ingredients needed for a local economy to deal successfully with the nation’s early-21st-century realities. State government provides an economic buffer, while the giant University of Texas campus attracts both energetic young brainpower and top professional talent. The rich academic environment helps incubate and support burgeoning tech companies and other higher-paying firms. The city’s modest size limits investor opportunities, but the diversity of educational, medical, and government jobs, backed by high tech, insulates the market from boom/bust scenarios.

San Francisco. The city rates as the survey’s best buy for offices and apartments. Bullish market investors are betting on office rent increases, pushing purchase pricing way beyond fundamentals. Counterintuitively, empty buildings look most attractive to some buyers. Overall market vacancies still register in the mid- to low teens, and demand can fall suddenly. Cap rates on “bulletproof” apartments cannot drop much lower, and house prices show the biggest gains in the nation after some precipitous declines. Hotel occupancies will recover smartly. The ardor of institutional investors never wanes, and surveyed investors believe it will not wane going forward for the expensive warehouse market serving one of the country’s largest ports.

New York City. Manhattan, which features a diverse employment base, will see its resurgence face headwinds from economizing at less-profitable investment banks and other financial institutions—the backbone of the city’s economy. Vacancies will actually drop to among the lowest levels in the country and rents will increase ahead of other markets, helped by a lack of new supply. Given enduring stability, office investors can be content with 4 to 5 percent cap rates. The nation’s best hotel market will flourish in a sea of foreign tourist traffic. Highest-in-the-country apartment occupancies could vault rental rates to record levels as co-op/condominium values edge up again after generally holding their own in the downturn. Investors will lose perspective if they spend too much time here; it is hardly a proxy for other parts of the country.

Boston. Despite relatively high office vacancy rates, Boston retains plenty of adherents who value an exceptionally well-educated workforce drawn from local colleges and universities. Subdued outlooks for mutual fund firms and other asset managers will spark concern in the Financial District, whereas the Back Bay outperforms. Most office projects will stay on drawing boards without greater leasing velocity, and development will prove difficult because of barriers to entry. The apartment market should perform exceptionally well, and condo prices will remain surprisingly buoyant. Housing prices will increase again after suffering only modest declines in the downturn.

Rounding out the top ten markets to watch:

  • Seattle bounces back thanks to its diversified new-age corporate base.
  • San Jose doesn’t skip a beat despite competition from the City by the Bay’s downtown tech surge.
  • Houston profits from lasting high oil prices and expands off a Texas-sized ­service-sector employment engine.
  • Los Angeles will come back—and the metropolitan area ranks as the nation’s number-two apartment and industrial investment market.
  • San Diego benefits from the near-perfect year-round weather, which helps attract talent pools to local biotech companies, as well as a steady stream of upscale retirees.

See, Real Estate Investment Prospects Around the Globe

ULI-the Urban Land Institute