Potential opportunities in real estate investing exist, but a heavy dose of caution is critical, according to panelists at the New York Society of Security Analysts’ annual Manager Search and Selection Conference this week.

Emerging markets and distressed properties were cited as the primary opportunistic real estate investments today.

“There is a bubble in major Chinese cities, but the opportunity is still tremendous,” said Ione Permison, a partner and managing director at Quilvest USA, and co-head of the firm’s real estate platform.

Her co-panelist on the real estate presentation, David Sherman, president and chief investment officer at Metropolitan Real Estate Equity Management demurred, saying he was “less bullish on China.” Sherman did say there were “fascinating opportunities” in Europe, however.

He also said distressed properties were a high priority for his firm and that “distress will continue to drive opportunities in the foreseeable future.”

Both panelists warned analysts and investors to be very cautious and conduct extensive due diligence when selecting a property manager.

“The PPM (private placement memorandum) doesn’t tell you enough,” Permison said.

Sherman added that it was advisable to “almost completely ignore track records” and instead spend more time asking others in the industry about managers and getting to know them better personally.

The panelists also stressed that real estate is both a cyclical business and a lagging economic indicator and Permison said that the fundamentals of commercial real estate in particular were still spiraling downward.

“More properties are going into distress, vacancies are up and rents are down,” she said. “I don’t think it will change until jobs turn around and are created again.”

“The biggest issue in real estate is timing,” Sherman added. “We’re still a long way from recovery. It could be three to six years away.”