Despite an uncertain economic environment, real estate continues to provide attractive returns to investors, according to an outlook from a unit of US insurer and asset manager Prudential Financial Inc.

PGIM Real Estate, the property investment business of PGIM Inc, the global investment management business of Prudential, said in New York on Wednesday that although the macroeconomic picture shows areas of concern that include China, real estate is still producing strong returns when measured against other asset classes.

Peter Hayes, head of investment research for PGIM Real Estate, noted that even though investors see a low probability of an economic hard landing in China this year, they do see a high risk to the global economy and real estate if that were to occur.

"Part of that reflects the fact that China is so huge with a population of 1.4 billion," said Hayes. "So even if growth is 5 percent, that still represents a lot of growth when compared to other economies."

China reported that its economy expanded 6.7 percent in the first quarter.

What is troubling to some investors is the debt situation in China. This week a report from Goldman Sachs Inc said China's debt may be much higher than what the official data shows.

"It's difficult to try to understand how big a problem the debt issue is in China," noted Hayes.

In China there are signs that the market for office property is cooling off, according to Eric Adler, CEO of PGIM Real Estate.

"We are seeing prices come down as much as 30 percent from a year ago in the major cities," Adler said. He added that this may present a buying opportunity for some investors.

There are other macroeconomic issues that could pose a problem for real estate, PGIM said, including the possibility of an interest rate increase in the US.

PGIM said it is "cautiously optimistic" about global real estate markets for the rest of this year. "Pricing does look high at first glance, but a more detailed analysis gives cause for comfort. Despite many markets reporting record rent levels, they remain relatively modest in real terms, leaving room for further expansion," the report said.

PGIM said real estate investment markets enjoyed a strong 2015, but the first few months of 2016 revealed signs that activity was slipping.

"Activity fell sharply in the first quarter of 2016, most notably in Asia-Pacific, Europe, and Latin America," said the report.

PGIM said investors have a diminished tolerance for risk and appear to favor investments in well known markets. New York, Los Angeles, San Francisco and Washington in the US, along with London and Paris in Europe were markets that saw a rise in transaction volume last year, the report said.

Despite slowing in the first quarter of the year, demand for prime real estate assets in major core markets like these cities remains strong, the report said.

Hayes said Chinese real estate investors will continue to shop overseas for assets.

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