PRETEND IT'S DECEMBER '08. HOW'D YA' DO?

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Not surprisingly, respondents to last week's poll weren'tjumping up and down. But neither were they jumping off of ledges.Some 50% of the 254 respondents said they'd Keep Their Heads AboveWater, while 37% claim they'd Rally and Profit. A sad 13% saidthey'd Bleed. Ward Caswell, just settling into his new post aschief research officer at Colliers International in Boston, iscounting on the fundamentals to pull us through:

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"It's going to be an interesting year, no doubt about it. We'veseen a slowdown in many parts of the economy that are affectingsales and leasing markets. A lot of folks have used the wordopportunity and some may look at that as being optimistic. I lookat it as being quite realistic. Even though many aspects of thecapital markets have gone to the trenches, there's still a lot ofcapital out there that has very specific real estate goals taggedto it that are looking for acquisitions.

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"Of all of the people who have contacted me in this new role,fully half are folks looking for specific types of acquisitions.And what they all seem to be waiting for is a firm grasp ofpricing. I'm not sure how much that's slowing down activity. As Italk to different people, everybody is still very busy, just not asfrantically busy as they were in the first half of '07. I've heardof some deals that sold out and others that got repriced and somethat got pulled off the table.

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"One of the battles I'm seeing right now is between twodifferent classes of players--traditional or longer-term playersand Wall Street. We're seeing those two different classes both onthe leasing side and investment side. The interesting part about itis that while they might be seen as the outsider in the commercialreal estate world, Wall Street firms have bought a lot of realestate. Now they're in the position of being owners trying to getgood net operating incomes, and we've seen some of them trying tojack up rents beyond the market.

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"They've been much more aggressive and ambitious in that regardcompared to some of the traditional players, and everyone'swondering what they could get. But economists will tell you thatlandlords don't set rents, the market does.

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"There is some opportunity coming on and it is frankly overduein a lot of areas where there hasn't been a lot of great space tolease. There hasn't been that bulk level of construction we saw inprevious cycles. Certainly there's a fair amount under way, but wehaven't seen the huge overhang we saw in previous cycles.

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"So the underlying fundamentals look pretty good. With WallStreet pushing for higher rents, the others have been watching tosee how it's going to go. I did believe this was what you mightcall a CNN recession. The core numbers don't say recession.

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"That being said, I've been talking with people at differentlevels of the economy, expecting something that would confirm thethought that this is a CNN recession. What I found was quitedifferent. I found that what the politicians are saying--which Ididn't put much stock in--actually seems to be true. People at thelower rungs of the economy are really feeling it. There are peopleout of work but not on the unemployment rolls, because the waytheir jobs have been structured, they've been forced into contractwork. There are people employed in trades who have gotten wagedecreases. And I've had the most shocking conversation with somefolks who are telling me their families are making choices betweencar payments and health care. So I'm a little more skeptical aboutthe strength of the economy than I was a couple of weeks ago.

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"But this industry is an optimistic group. And it's thatoptimism that will actually pull us through it. People are waitingfor momentum. They're waiting for action."

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John Salustri

John Salustri has covered the commercial real estate industry for nearly 25 years. He was the founding editor of GlobeSt.com, and is a four-time recipient of the Excellence in Journalism award from the National Association of Real Estate Editors.