The roundtable, sponsored by Pacific Life Insurance Co. and the MBA's Portfolio Investors Committee, included presentations by real estate economist Daniel Van Dyke of Rosen Consulting Group and Stanley Iezman, president and CEO of American Realty Advisors, who outlined the implications of real estate trends for commercial real estate lenders.

The bankers discussed a broad range of issues and concerns, according to Thomas Jensen, senior portfolio manager of Allstate Investors and vice chair of the MBA's Portfolio Investors Committee. Jensen says a recurring question throughout the conference was "Where will the jobs come from?"

The jobs question has to do with the concern "among lenders and economists alike" that the pace of job growth in the current economy is too slow to generate demand for commercial space, especially in the office sector.

"Right now the GDP (gross domestic product) is positive, but it is too slow to generate significant job growth," Jensen said. "The participants were interested in knowing where the job growth going to come from."

According to John Packer, an assistant vice president at Pacific Life, "One of the points that seemed to resonate with the group was that in previous recessions, the jobs that were lost were manufacturing jobs, but those that are being lost now are white collar office jobs." Lenders are concerned, Packer said, that because of the white collar job losses, "The office sector is especially vulnerable, and vacancy rates could continue to climb if we don't have more job growth."

Wendy Balden, also an assistant vice president at Pacific Life, said another concern of the lenders was that "the economic signals continue to be weak," and that the combination of job losses and high consumer debt could ultimately impact commercial underwriting.

According to Packer, the consensus among the lenders seemed to be that of the four major commercial property types, "office looks the weakest going forward," while retail seems the strongest, with industrial and apartment markets in the middle.

Another consensus, according to Jensen, was that lenders "are sticking to their guns" on underwriting standards. "That is a change relative to the last real estate cycle, in the late 80s and early 90s," Jensen said.

The lenders also examined the phenomenon of rising real estate prices and falling cap rates at a time of weakening market fundamentals, the relative appeal of real estate versus competing investments, and the difficulty of finding good deals at a time when capital is flooding the market. They noted that the capital is coming from institutional investors as well as "hot money" from private investors in 1031 exchanges who are willing to pay high prices for real estate in order to beat the deadlines on their exchanges.