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CHICAGO-Institutional investors remain willing to accept relatively low returns from their real estate holdings, according to Real Estate Research Corp.'s most recent survey, but are increasingly concerned about the strength of the economy. The firm's summer report finds institutional investors rate the economy a 5.8 on a 10-point scale, down from 6.2 in the first quarter.

"It appears that the commercial real estate market is heading into a more challenging capital market setting, as will all investments," says Real Estate Research Corp. chief executive officer and managing principal Ken Riggs. "Once a new plateau is reached, investors will shift their allocations to alternative investments and commercial real estate will lose some relative advantage. However, as we change to a more global environment where commercial real estate retains strong investment appeal, real estate will continue to be a necessary element to investors' overall target performance."

Multifamily investors are willing to accept going-in capitalization rates of 6.8%, according to Real Estate Research Corp.'s report. The required capitalization rates for hotels continue to be highest, at 9.3%.