If the recovery slows measurably in the U.S. and financial issues in Europe worsen, REITs could feel the impact, says Michael Hudgins, global REIT strategist at JPMorgan Asset Management. "This would put a damper on the potential for capital appreciation for REITs until the cash flow for those properties goes positive again," he says. Estimating the risk in Europe is tricky, Hudgins says, as JPMorgan's research shows that total returns there are often linked to local nominal GDP.

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