(Crystal Proenza is associate editor of RealEstate Florida.)

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MIAMI-The commercial real estate industry may be holding itsbreath until 2010, according to forecasts given at this year'sUrban Land Institute Fall Meeting at the Miami Beach ConventionCenter. Panelists at this year's planned sessions remained upbeatwhile reporting overall rising vacancies and dipping rents acrossthe board to packed, standing-room-only audiences.

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"Our view is that we are most likely going to have a deepeconomic recession akin to the early '90s," said Kenneth Rosen,chairman of the Fisher Center for Real Estate & Urban Economicsat the Haas School of Business in Berkeley, CA. Rosen was part of apanel forecasting the national office, retail, industrial andapartment markets. The recession began in the early part of thisyear and remained moderate until September, when the situationbecame more severe, he explained.

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"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-basedReis, prefaced the panel's forecasts by saying that where themarket will go over the course of the next year depends onbehaviors and sentiment, two elements that are difficult togauge.

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Sizing up the national office market, Chandan said buildingowners appear to be holding the line on asking rents, but are doingso in order to price discriminate within the market. Landlords areoffering concessions during the process of negotiating effectiverents, he said.

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On a positive note, Rosen noted that overbuilding within theoffice sector is not happening across the country. Also, a strongniche recovery in the economy will see high absorption rates in2010, said Bret Wilkerson, CEO of Property & Portfolio Researchin Boston.

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

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The threat of a global recession has thrust the industrialmarket into murky waters as well, with reported modest rentdeclines, according to the panelists. Toro Wheaton's Southardexplained that an increased use of Canadian and Mexican ports isdriving a shift in the global path of goods, creating a flow ofindustrial through the center of the US. Long term, panelistsagreed that the industrial market has a strong outlook and now is agreat time to buy.

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However, the best place for investors to look long term is theapartment market: "The echo baby boomers are coming on to themarket and half a million more people per year will be rentingapartments than the last decade," Rosen told the attentive ULIaudience. Other panelists pointed out that the availability offinancing from Fannie Mae and Freddie Mac will be prevalent forsome time, and there is also significant growth potential foraffordable housing.

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During an earlier discussion of the capital markets, RandyReiff, senior managing director with New York City-based JP Morgansaid what the markets are experiencing is "unprecedented" and "willcontinue to give us angst for a while." Even the lenders who werelending are now slowing down, he explained. Fellow panelists agreedthat capital is available, but borrowers just aren't happy aboutpricing.

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A so-called "fear factor" is holding sellers and buyers backfrom acting in the current environment. Panelists agreed that thebest opportunity right now is buying distressed debt. Propertieswill begin to come to the market only when owners absolutely haveto sell because for the structure of their debt; but buyers werewarned to be cautious. "Don't just go for high-yield in marketsthat won't perform economically," said Rosen."It's early; priceswill get cheaper," said capital markets moderator MichaelFascitelli, president of Vornado Realty Trust in New York. "Bepatient and liquid."

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