NEW YORK CITY—The year ahead represents what EY calls a "new environment" for real estate fund managers, a time marked by rising interest rates, potential declines in property values over the long term and the emergence of distressed opportunities. "The cycle is clearly turning, and the successful investment strategies of yesterday may not suit the conditions emerging today," according to EY's Global Market Outlook 2016.

Whereas in the years following the 2008 capital markets crisis investors could have profited from an "index-style approach," successful managers in today's market will need to behave "much more like stock pickers," according to the EY report. It will require managers "to take a more creative approach to investing, to hone and fine-tune their strategies and to ensure they are identifying the right assets to acquire in the right markets to fit with their risk-reward tolerance."

Or, as Mark Grinis, global real estate fund services leader at EY, puts it in an introduction to the latest report, "The most successful real estate fund managers will be those that are able to stay focused: they must focus on fundamentals and keep one eye on international events and the impact they may have on their local investments. Taking this twin-track approach will help guard against overreaction to aftershocks and promote stability in investment strategy as we move firmly into the new, post-crisis era."

By and large, it appears that the commercial real estate sector is already mioving firmly into this new era. "Fundraising is up, real estate investors are finding a variety of opportunities in markets across the globe (including in some markets that have seen slowdowns), new sources of financing are emerging in markets such as Israel, and the industry is innovating to provide investors and fund managers with liquidity," writes Grinis.

EY's report notes that over the course of 2015, we have seen "healthy levels of deal flow across the gamut of fund products, from core, opportunity and value-add, to separate accounts and direct investments by sovereign wealth and pension funds. This speaks to a market that is firing on all cylinders as primary markets remain strong. Secondary markets still have a little way to go as local economies have improved, creating demand for new construction, and development and distressed opportunities are starting to emerge."

And although there isn't any doubt that competition in core markets is continuing to intensify, especially as cross-border investment continues picking up, EY notes that demand for space in primary cities across the US, Europe and Asia conrtinues to be high. Over the past 18 to 24 months, competition and high prices have led some investors "to move farther from the city centers of core markets and also to move across the risk curve toward secondary cities. Here we are seeing good new product origination, and there is certainly opportunity, although newer investors may need to tread with caution as this part of the market is deep into the real estate cycle." Click here to access the complete report.