From the opening keynote address by chairman Stan Ross of theUSC Lusk Center for Real Estate through the sessions on finance anddevelopment to remarks by Lifetime Achievement Award recipient JohnCushman, speakers representing virtually every facet of thecommercial real estate world and every property type examined thereal estate landscape for signs of what lies ahead. The day'sdiscussions, which invariably turned to the implications of thecredit crunch, included debates about whether buyers and sellersare acting or failing to act out of fear or uncertainty, what theprospects are for various property types and geographic markets,and mention of the maxim that in times like these, cash is king.And one member of the economics panel said that today's conditionswill produce “a Darwinian herd-thinning event”in the commercial real estate world.

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Possibly one of the most succinct summations of the situationcame from Cushman, who advised the audience, “Don'tpanic, but don't turn a blind eye to the issues that meritconcern.” Like Cushman, other speakers and paneliststhroughout the day suggested that real estate professionals todaymore than ever need to maintain a realistic perspective thatacknowledges the problems facing the industry but also recognizesthat downturns, like bull markets, eventually end.

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Ross, for example, outlined a list of worrisome factors such asdeclining consumer confidence and slowing job growth, but he alsopointed out positive forces such as the Federal Reserve's supportfor low short-term interest rates and the strength of industrieslike healthcare and technology. He pointed out that times likethese present opportunities for well-financed investors to acquiredistressed loans and foreclosed properties at a discount. Ross alsocited the projected US and worldwide population growth that willultimately represent immense new opportunities.

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Principal Chris Thornberg of Beacon Economics, the most bearishof the economic panelists at last year's RealShare event, commentedthat he is “still relatively bearish,” citingcap rates that he says will be unsustainable without big rentincreases that are unlikely in today's environment. Panel memberRandall Zisler, chairman and CEO of Zisler Capital Partners, coinedthe comment that the industry is in for a “Darwinianherd-thinning event” because there are simply too manybrokers, developers and others that got into the business duringthe boom times. Zisler forecast that the changing markets willproduce “the largest transfer of wealth over the next twoyears since the RTC period,” a reference to theResolution Trust Corp. that the US government created to liquidatefailed savings and loans in the crash of the early 1990s.

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Cushman referred to the earlier downturns too, pointing out thatthe industry has weathered conditions such as 20% interest rates in1979-1980 and nationwide office vacancy rates approaching 17% afterthe overbuilding of the late 1980s. “We've been throughworse conditions than this before, both as a nation and as anindustry,” the Cushman & Wakefield chairman said.

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A number of speakers commented that some aspects of the economicslowing and housing industry problems today actually work to theiradvantage. Robert Hart, president and CEO of KW MultifamilyManagement Group, pointed out that many former homeowners who havelost their properties to foreclosure are now moving to job centersand looking for apartments, a phenomenon that “has putupward pressure on rents” for apartments. Hart noted thatKW's properties are all at 97% occupancy or better. Anothermultifamily panelist, senior vice president Greg Harris of Marcus& Millichap, commented that those specializing in apartmentsare “fortunate to be in the multifamilybusiness.”

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Panelists throughout the day acknowledged that deal flow hasslowed, financing is difficult and, in the words of broker panelmember Jim Kruse, a senior managing director with Grubb &Ellis, the “euphoria and hysteria” of the boompart of the cycle have been replaced by uncertainty. Al Pontius,SVP and managing director with Marcus & Millichap, cited the“change in the portfolio premium,” explainingthat portfolios no longer command higher pricing per property thansingle assets, while president Rich Walter of Faris Lee Investmentsobserved that deals under $10 million are less affected by thecredit crunch than others because the bidders are “cashbuyers who are still active.”

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The panelists agreed that Orange County will struggle to recoverfrom the subprime meltdown over the next couple of years because somuch office space has been vacated by mortgage firms, while the LosAngeles office market will fare better. In a discussion of pricing,Bob Osbrink, executive vice president of transaction services forGrubb & Ellis, was one of many during the day to cite the gapbetween sellers' expectations and the prices that buyers areoffering. “Sellers are still in denial,”Osbrink said. When the topic turned to whether rents will rise,fall or stabilize, Osbrink pointed out that, “It isclearly a market-by-market phenomenon. It's hard to make a generalstatement” about how rents will fare.

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Speakers and panelists differed considerably in their views onwhen the current downturn will start back up, with projectionsranging from the end of this year to mid-2009 and later. One of theeconomic panelists, president and CEO Jeff DeBoer of the RealEstate Roundtable, observed that this latest downturn after such along bull market was proof that, “Those who said in thelate 1990s that the business cycle had been repealed obviously werewrong.”

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Thursday's conference, at the Westin Bonaventure Hotel inDowntown Los Angeles, was part of the annual RealShare ConferenceSeries produced by Real Estate Media, publishers of GlobeSt.com aswell as a group of print publications including Real EstateForum and Real Estate Southern California. The eventfeatured 11 panel sessions with a roster of 70 speakers, along withnetworking throughout the day and a networking cocktail hourfollowing the conference.

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