GlobeSt.com: How will an economic downturn impactthe sector over the coming year?

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Moore: If you look at history, it shows us thatthe industrial market does move largely in sync with the generaleconomy. It's less sensitive to job growth. It's more a reflectionof what's going on with the economy and economic activity. That'stypically the way it goes.

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What this year has taught me is that industrial is more tied inwith the housing market than I gave it credit for. That's my excusefor getting our 2007 forecast wrong. We were largely right. Wherewe were off was on the demand side. If you ask why we were off, I'dhave to say it was housing. I've got a list of 10 indicators that Ilook at that I believe significantly influence the industrialmarket, and housing is on there. We track a multitude of housingdata.

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What we didn't fully realize is that housing, furnishings, homeimprovement, landscaping and appliances, everything tied in. It wassignificant. Now when I'm looking at 2008, I'm certainly morecognizant of how that could impact industrial.

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GlobeSt.com: How will industrial fare compared toother sectors?

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Moore: You've got a pretty good battle going onhere. It's the domestic economy versus the global economy,specifically exports. Our view is that exports are going to be hugethis year and will be a key source of growth. The question is, onthe domestic side, how weak will it get? What impact will that haveon domestic consumption?

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There is absolutely no way that exports can compensate for afull on recession. But if the slowdown is restricted or mostlycentered around housing, then industrial can do OK. If you ask meto compare industrial to retail and office, I think everybody'sgoing to feel it. Retail is the one I'm most nervous about, andoffice is going to be a little better insulated. What we have towatch there is how much fallout we're going to see in financialservices. I'm still positive on industrial. I think it's going tosurprise on the upside. Mind you, I think my expectations have comedown somewhat as have everyone's expectations.

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What concerns me a little bit more about industrial compared tothe other property types is that we've got more construction goingon that office or retail. I don't want to say that we have atsunami of construction, but we've got a sufficient amount to drivethe vacancy rate up. That's something we have been forecasting forthe last two or three quarters. We've probably seen the low point,and the vacancy rate will start creeping up.

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GlobeSt.com: If there is a problem with retail,will that have a big impact on warehouses?

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Moore: Absolutely. If you're stocking the shelvesless often because you're selling less, then you're going to haveless demand for warehouse space. You're not going to be opening newwarehouses if you're seeing your sales on decline. That will bepart of the equation. I would say that I think it will be less sothis time around, and that just ties back to how much moreefficient retailers are. They're not storing stuff like they usedto. Just because the machine is more efficient, you're not going tosee those huge swings. But compared to past cycles I think we'llfell it quicker. From a researcher's perspective, what's struck meabout the last five years is that everything happens so muchfaster.

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GlobeSt.com: Will any other industries have alarge impact on the sector?

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Moore: I think we need to look at what's going onwith energy. If we have a significant spike in fuel prices, it isgoing to change the matrix. One of the trends that we've seen overthe last couple of years is fewer distribution hubs but largerdistribution hubs. I wonder whether that model starts to break downif fuel prices really do spike. All of a sudden you're driving1,000 miles, and it used to make sense. Now it makes way more senseto have a second distribution hub. I wonder whether you may seecompanies say they're going to open more facilities because you'vegot high fuel prices because it's not economical to serve a verylarge geographical area.

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GlobeSt.com: How do you see the port situationshaping up over the next year?

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Moore: You are going to see more and more productscoming in on the East Coast. You're not reading about thebottleneck in Long Beach that we were hearing about, but thatproblem hasn't gone away. These guys are looking at alternativeports, whether it's down in Mexico or the Pacific Northwest, ordown in Panama and places like Jacksonville and Savannah. That's afairly well-established trend. If the US economy does slow down,you are going to see some considerable slack created. But that'sgoing to be a temporary phenomenon. I think that the macro ormedium-term trend is very much still in place. Exports and themarkets that have benefited – it's hard to picture a reversal inthose trends any time soon.

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