2004 Emerging Trends report issued.


ACCORDING TO A REPORT BY THE URBAN Land Institute (ULI), Washington, D.C., and PricewaterhouseCoopers LLP, New York, Emerging Trends in Real Estate[R] 2004, real estate investors' attitudes toward next year's industry outlook range from "cautiously pessimistic" to "at best, less sanguine."

The annual real estate investment trends report, based on surveys and interviews with more than 350 of the industry's leading authorities, finds 2004 to be widely regarded as a transition period, as markets move toward a weak recovery tempered by rising corporate outsourcing of jobs overseas, a lack of U.S. job generators and fiscal woes at all levels of government.

The report says that so far, returns continue to belie weak market fundamentals, including high vacancy rates, falling rents, resurgent concessions, rising property taxes and higher operating expenses. However, if interest rates rise too quickly before job growth drives up leasing activity, property values could fall even as the economic recovery gathers steam, according to the report. A sudden rebound is not expected in the industry--rents will be flat in most sectors, down more for the office sector, the report maintains. "Income returns will carry the day, appreciation will be negligible and many office markets will experience value dips or worse," the report states. "Retail returns will moderate; warehouses, apartments and hotels show slight improvements. Capital flows remain plentiful, but will diminish as an improving stock market draws attention away [from real estate]. Defaults and delinquencies will increase modestly, [and] again office markets will be the most troubled."

Emerging Trends in Real Estate examines the outlook for real estate capital markets and contains an annual forecast for all categories of the commercial real estate industry, including apartments, regional malls, downtown offices, warehouses, community shopping centers, suburban offices, research and development (R & D) space, power centers, full-service hotels and limited-service hotels.

The report notes that the jobless recovery is the interviewees' leading concern. "Real estate markets need corporations to expand their U.S. work forces to fill empty office space, increase production and distribution benefiting warehouses, and step up business travel to lift hotels. Additional wage earners, cashing bigger paychecks, [will] rent more apartments and spend more in malls. That hasn't been happening," the report says.


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