MIAMI-The commercial real estate industry may be holding its breath until 2010, according to forecasts given at this year's Urban Land Institute Fall Meeting at the Miami Beach Convention Center. Panelists at this year's planned sessions remained upbeat while reporting overall rising vacancies and dipping rents across the board to packed, standing-room-only audiences.

"Our view is that we are most likely going to have a deep economic recession akin to the early '90s," said Kenneth Rosen, chairman of the Fisher Center for Real Estate & Urban Economics at the Haas School of Business in Berkeley, CA. Rosen was part of a panel forecasting the national office, retail, industrial and apartment markets. The recession began in the early part of this year and remained moderate until September, when the situation became more severe, he explained.

"This is a tremendous abyss we're looking into," Jon Southard, principal with CB Richard Ellis' Torto Wheaton Research in Boston, bluntly stated. Sam Chandan, chief economist at New York City-based Reis, prefaced the panel's forecasts by saying that where the market will go over the course of the next year depends on behaviors and sentiment, two elements that are difficult to gauge.

Sizing up the national office market, Chandan said building owners appear to be holding the line on asking rents, but are doing so in order to price discriminate within the market. Landlords are offering concessions during the process of negotiating effective rents, he said.

On a positive note, Rosen noted that overbuilding within the office sector is not happening across the country. Also, a strong niche recovery in the economy will see high absorption rates in 2010, said Bret Wilkerson, CEO of Property & Portfolio Research in Boston.

Switching to retail, Wilkerson joked that there are only three things wrong with the market: supply, demand and pricing. "It's a disaster if you believe the consumer is a disaster," he said, echoing the panel, which cited lack of available discretionary spending money for consumers, store closings and bankruptcy as evidence. "For 15 straight years the usage of coupons has been down," he quipped. "This is the first year coupon usage is up."

The threat of a global recession has thrust the industrial market into murky waters as well, with reported modest rent declines, according to the panelists. Toro Wheaton's Southard explained that an increased use of Canadian and Mexican ports is driving a shift in the global path of goods, creating a flow of industrial through the center of the US. Long term, panelists agreed that the industrial market has a strong outlook and now is a great time to buy.

However, the best place for investors to look long term is the apartment market: "The echo baby boomers are coming on to the market and half a million more people per year will be renting apartments than the last decade," Rosen told the attentive ULI audience. Other panelists pointed out that the availability of financing from Fannie Mae and Freddie Mac will be prevalent for some time, and there is also significant growth potential for affordable housing.

During an earlier discussion of the capital markets, Randy Reiff, senior managing director with New York City-based JP Morgan said what the markets are experiencing is "unprecedented" and "will continue to give us angst for a while." Even the lenders who were lending are now slowing down, he explained. Fellow panelists agreed that capital is available, but borrowers just aren't happy about pricing.

A so-called "fear factor" is holding sellers and buyers back from acting in the current environment. Panelists agreed that the best opportunity right now is buying distressed debt. Properties will begin to come to the market only when owners absolutely have to sell because for the structure of their debt; but buyers were warned to be cautious. "Don't just go for high-yield in markets that won't perform economically," said Rosen."It's early; prices will get cheaper," said capital markets moderator Michael Fascitelli, president of Vornado Realty Trust in New York. "Be patient and liquid."