NEW YORK CITY-As investors continue their flight-to-quality in core markets, a new study shows that strong alternative opportunities exist outside the gateway cities. According to Ernst & Young’s 2011 “Global Market Outlook: Trends in Real Estate Private Equity,” now is the time for fund managers to capitalize on distressed deals--even amid an uncertain and volatile market.

“There are now signs the sector is reaching bottom, and fund managers should brace themselves for an acceleration of deals and financing activity to hit the market, albeit slowly, over the next several years,” says Mark Grinis, Ernst & Young’s global real estate leader, in a statement.

The report shows that the aftermath of the financial crisis has had a substantial impact on transaction volumes and a material impact on the amount of leverage in the marketplace and availability of debt. As a result, the property market has contracted, which leaves more room for new types of deals to emerge. “The market is much smaller in terms of the amount of equity being raised, the availability of debt financing and the number of transactions,” Grinis says.