Kickoff speaker Roger Staubach, executive chairman of Jones Lang LaSalle Americas, pointed out that this year's outlook is decidedly more upbeat than it was at this time last year. "There's definitely a more positive atmosphere," although worries remain about the strength of what is taking place in the economy, Staubach said.

Among the points in the forecast that specifically addressed Los Angeles and California was the observation by Colin Dyer, Jones Lang LaSalle's CEO, that Los Angeles is one of the markets where investor confidence is beginning to warm up, along with Washington, DC. Dyer, who offered a perspective on real estate markets around the world, said that while the crash of global real estate markets in 2008 is now turning into a recovery, the recovery will vary not only by geography but also by property segment.

One of the obstacles on California's road to recovery is severe unemployment, pointed out Richard Weiss, executive vice president and chief investment officer of City National Bank. Although the entire nation faces unemployment, seven out of the 10 hardest-hit US cities are located in California, he noted.

On the other hand, Weiss pointed to bright spots in technology in Silicon Valley and the weak dollar's impact on international trade aiding exports in port markets in Long Beach, Los Angeles and San Francisco. Weiss projects a spotty outlook for California municipal bonds, but sees two factors weighing in their favor: low supply and advantages from possible tax hikes at the federal or state level.

Another observation regarding bond finance in California came from Hamid Moghadam, chairman and CEO of San Francisco-based AMB Property Corp., who was interviewed by Peter Roberts, CEO of Jones Lang LaSalle Americas.

When asked about the Los Angeles-Long Beach-Santa Ana MSA having the highest balance of delinquent CMBS in the country at $1.7 billion and growing, with 38% of that balance lent against industrial properties, Moghadam cited eventual opportunity. While in the short-term, there may be some denial of distress, in the long-term it may lead to stronger investment opportunity, he said. However, for good assets, the market is much more liquid, he added.

For 2010, Moghadam sees a fair amount of demand for well-leased real estate with reasonably good credit tenants. However, there may be better opportunities to buy into good, long-term assets that are undermanaged. Additionally, markets like the Los Angeles Basin and Northern New Jersey offer fundamentally stable long-term drivers of demand, he said. Outside of the US Moghadam posited Brazil as an interesting market, as well as Mexico as a high-risk, high-return locale.

Dyer, in his perspective on real estate markets around the world, said that in general, investment sales are leading, while leasing fundamentals are still lagging. He indicated that bank lending will be key to the pace, confidence and magnitude of recovery around the world. "If we had to typify 2010, it will be a happier new year than last year, but 2011 will be happier still," he said.

JLL, which this week issued its Global Market Perspective on real estate, sees Asia moving toward recovery sooner than select European markets, while the US has lagged behind world growth, Dyer said. For 2010, he says, while JLL foresees leading US cities beginning to gather investment sales momentum, the picture varies significantly by region and country. Prices are rising in some markets, but falling in others, like Spain and Singapore, while markets in the US and Mexico remain at low activity levels.

Dyer said that recovery in the US is expected to eventually follow a path similar to that in London, pushed ahead by investment sales volumes in leading cities beginning in the second quarter of 2010. Investment volumes across the country are anticipated to recover by 30% to 50%, coming off a very low 2009 base. While there may be some return of CMBS issuance in 2010, it will be transparent and conservative, he said.

Jay Koster, president of US capital markets for JLL, offered further outlook on the CMBS market and finance in general. Citing the return to rational underwriting that marked 2009, he predicted a 50% increase in transaction volumes in the US across all product types in 2010. Most of last year's issuance in the CMBS market occurred in the fourth quarter 2009, and Koster foresees a return to late-1990s levels, approximately $20 billion to $25 billion of issuance in 2010, with conservative investment parameters and underwriting.

Into 2011−2012, Koster expects that a relative floor has been hit for values in the US, although challenges will persist from a leasing and income perspective, offsetting some of the improvements in the capital markets. Koster said that overall, the industry is feeling much better about 2010 as compared to 2009, with a better outlook and more energy.

Instant Insights /

Forecast Sees Bright and Dark Spots in Recovery

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