Regarding the fundamentals, Adler said that corporate downsizing is adversely impacting the office market, restrained consumer spending can harm the retail sector, and a shift to overseas manufacturing is having a negative impact on industrial space. Despite this, he sees opportunities, particularly in light of today's interest rates, especially for those who take new approaches to real estate investing.

He pointed to flaws in the tradition of "core" investing in A-quality assets. "Because of deteriorating fundamentals," he said, "these properties have a higher price, lower returns, and higher risks," compared with alternative, under-valued properties.

"Hotels," he added, "are not priced appropriately for the current risk. The market volatility is huge."

"Lock in as much 10-year financing as you can get," he advised. "Although this challenges the conventional thesis against assuming long-term debt, at today's rates, with long-term debt, owners can deliver debt at 5.5% interest to buyers."

In retail, Adler said, "there's a huge opportunity to pursue sale/leaseback transactions with retailers who need cash." He also said, "be careful of `safe' grocery-anchored shopping centers." Wal-Mart, he noted, is now the country's biggest grocer, and that trend puts traditional supermarkets "in peril."

Significant rehab opportunities exist in multifamily properties, according to Adler, especially around urban universities. "Every major urban dorm needs proper life safety upgrades," he said. New development, aimed at niches, such as empty-nesters, presents an opportunity, as does redevelopment where single-family housing costs are high.

Not least, Adler warned against the emergence of "syndicators and financial engineers," - non-real estate professionals - entering this field. He called it "an alarming trend that could damage the credibility of our industry."

Instant Insights /

GlobeSt.com EXCLUSIVE: Local Investor Decries Conventional Real Estate Wisdom

Related Stories

Recommended For You