"Dallas is a victim of the outside. The fundamentals of thismarket remain more balanced than any other market in the country,"says John Alvarado, Jones Lang LaSalle's managing director inDallas. "We're at a standstill because we're in a moment oftransition."

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Zaya Younan, chairman and CEO of Los Angeles-based YounanProperties Inc., faults the Feds for not stepping in quicker tobail out the system so markets like Dallas, where fundamentals arestill good, could keep moving. "They reacted very slowly to come upwith policies to reverse the trends," Younan contends, "and to thisday, they are reacting slower than they should be. That's why theconfidence factor is lower."

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Both pros have vested interest in Dallas: Alvarado as aninvestment sales broker and Younan as the owner of the largestclass A office portfolio in the city. [IMGCAP(2)]"Dallas commercialreal estate investment has halted," Younan says, emphasizing thatthe region isn't at fault. As a result, he insists it's too earlyin this market to have an impact on tenant decisions. "The weaknesshas not been prolonged long enough to have an impact," heexplains.

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Brokers are starting to whisper that more owners are offeringfree rent and higher tenant-improvement allowances to win or retaintenants, but they aren't finding cuts in face rents as yet.GregLeisch, president and CEO of Washington, DC-based DeltaAssociates, expects rents to hold their present levels as long asDallas/Fort Worth stays in its vacancy equilibrium zone of 17% to19%. In 2009, he predicts rents will continue to hold the line anddip in 2010 by 1% in Dallas and 0.50% in Fort Worth.

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The sales side of the CRE equation shows a 45% drop since lastyear, according to Leisch. To date, $3 billion of assets have beensold in the region. It could hit $3.8 billion by year's end, buthe's not making any promises.

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Alvarado and others firmly believe the lack of paper is theprimary cause of the region's slide in sales. "Dallas is seenmostly as a bright spot, but it's not immune," Alvarado says."There are a lot who do want to buy, but can't."

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Unlike recent years, it's not about the bid-ask spread. Not onlyis financing sparse and difficult to obtain, but Alvarado explainsthat lenders, buyers and sellers are having problems calculatingprices in today's topsy-turvy world. As a result, most are hangingon to what they've got. The investment rule of thumb duringrecessions is "don't panic," he says. "Unless there's a stresssituation [to sell], there's no need to panic."

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And unlike one year ago, Alvarado says lenders are "morecooperative" in reworking loans to recapitalize owners so they canwait out the market. In other cases, owners are recapitalizing bytaking on an equity partner.

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[IMGCAP(3)]The spot to watch in the coming months will beREITs asthey assess portfolios and adjust allocations to suit today'stimes. Alvarado says imbalances will be inevitable, with some mostlikely finding their 7% to 10% real estate allocation outweighsother investments in portfolios. "It may cause some prematureselling," he adds. "Pension funds are entering their planningphases and may have to give orders to trim their real estate inorder to rebalance their portfolios."

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As a buyer waiting to strike, Younan, an economist by degree,says everyone has had to put deals on hold as a result of thecurrent crisis. "The government's wait-and-see attitude has reallyexaggerated this problem today," he says.

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Younan quickly points out that the US, with a $14-trillioneconomy, provided a $750-billion bailout while the Europeancommunity, with a $12-trillion economy, came up with a $2-trillionfix. "It's a smaller economy, but they came up with a bigger andbetter package," he says. "It is time for our government to be moreaggressive than it has been in the past."

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Dallas/Fort Worth's stayed afloat this time due to creditcontinued demand for office space, construction willpower, jobgrowth and diversity in the business base. "The bottom is notlikely to fall in this market as much as others because demand hasbeen sustained," Alvarado says. "Dallas' Achilles heel has alwaysbeen excessive construction. In this past cycle, we were moredisciplined and that has helped with the fundamentals inDallas."

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But, the fundamentals are victims of today's financial crisis."Buyers recognize fundamentals in this market are strong, but theyare not able to secure the capital to make acquisitions," Alvaradosays. "The money's just not available."

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And if history holds true, Dallas/Fort Worth historically fares better than othermetros during recessionary times. "It's often the recipient ofcorporate relocations during recessions. I would not be surprisedif that happened now," Alvarado says. "The caveat is if therecession deepens beyond people's anticipation, all areas of thecountry will suffer."

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