Based on surveys and interviews with more than 350 industry executives, Emerging Trends in Real Estate 2004 respondents widely regard next year as a "transition" period, as markets move toward a weak recovery thanks to an increase in corporate outsourcing of jobs overseas, a lack of US job generators and fiscal woes at all levels of government.

First distributed late last week at the ULI's fall meeting here, the report found, as expected, weak market fundamentals, including high vacancy rates, falling rents, resurgent concessions, rising property taxes and higher operating expenses. And if interest rates rise too quickly before job growth drives up leasing activity, the report found investors expect property values would fall even further as the economic recovery gathers steam.

"No one expects a sudden rebound–-rents will be flat in most sectors, down more for office. Income returns carry the day, appreciation will be negligible and many office markets will experience value dips or worse," according to the report. "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, again office markets will be the most troubled."

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