One of the most striking differences between this year and last year is the extent to which public discussions about economy have lapsed into gloom and doom scenarios, according to economist Chris Thornberg, principal at Beacon Economics and a member of the economics panel at Thursday's event. Thornberg said that those talking gloom and doom today are doing so with "a degree of hysteria" that is extreme and unwarranted.

Thornberg, who was one of the first to forecast the current recession and was considered pessimistic when he did so, said that the doomsayers are wrong because, although the way to recovery is going to be painful, he expects that the economy will be in recovery mode by late this year or early 2010 and that by the end of 2010 it will surely be on its way to GDP growth again.

Recovery was also the bottom line for keynote speaker and CMBS pioneer Ethan Penner, executive managing director at CB Richard Ellis Investors, who outlined the causes of the financial markets meltdown and offered some prescriptions for fixing them. Penner said that one of the fundamental problems preventing a recovery is that investors both in the US and around the world is that have lost their trust in the free market, a trust that is one of the foundations of the US financial system.

Restoring that faith is one of the first steps on the road to economic recovery, Penner said. There is light at the end of the tunnel, he said, but when the recovery will not be soon or rapid. In the meantime, he said, the current economic conditions represent a bear market that is in many ways preferable to the runaway bull market that preceded it. Bear markets enable investors to "stick to their principles" and have more control over the prices they pay for assets, he explained, whereas bull markets create such a flood of capital that investors lose that control.

One of the steps that ought to be taken on the road to recovery is marking assets to market value, Penner said, a sentiment that was echoed by economist Richard Green, director of the USC Lusk Center for Real Estate. Green called marking-to-market a necessity to "clean up the housing mess."

When the recovery does arrive, economist Randall Zisler , president and CEO of Manning Napier Zisler, said that one of his worries is that it will lead to "roaring inflation" two or three years from now. The other economists said they weren't sure if the recovery will produce inflation, but they said it could produce pricing instability that would be worrisome.

The economists seemed to agree that a recovery will be under way by some time in 2010, as did the members of a panel that tackled the topic: "The capital conundrum." The panelists agreed that the causes of the financial markets meltdown included overleveraging and flawed assumptions that resulted in bad loans, and they generally agreed with the economists that they expect to see a recovery under way by 2010.

Panelist David Binswanger, executive vice president at Lincoln Property Co., said that one of the obstacles to getting capital flowing again is the Catch 22 condition of the markets today. Capital won't return to the market until investors lose their fear, he said, but they won't lose their fear until capital returns to the market.

The economics and investment panels were part of a day of presentations, keynote remarks and panel discussions that featured more than 60 leading industry speakers and three networking breaks along with breakfast, lunch and a networking reception at the Real Estate 2009 conference. The sessions addressed issues ranging from distressed assets to recapitalization, workouts, restructuring and other topics that are foremost in the minds of commercial real estate professionals these days. The Real Estate 2009 conference is an annual event that was produced by Incisive Media, publisher of Real Estate Forum, Real Estate Southern California and GlobeSt.com. The RealShare Conference Series produces more than 30 commercial real estate networking events every year.

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Hope Shines Through Economic Clouds

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