SAN FRANCISCO-”The world is not ending, as many people thought in late 2008, early 2009.” So said panelist Bob Gray, senior managing director of Rockwood Capital, as he reassured an audience of 150 at the Urban Land Institute’s Capital Markets: 2010 Market Drivers of Real Estate last week in downtown San Francisco. Indeed, the consensus among panelists, who represented commercial banks, private equity funds, pension fund consultants and private investors, was that while there is measurable stability in the labor market, economic growth will be slow throughout 2010.

Faye Beverett, a principal at Bard Consulting LLC, said pension funds will take back discretionary authority, resulting in a slower purchasing process. “In the next year, we’ll see pension funds use money allocated to real estate to rescue existing assets whereas new acquisitions will focus on core product,” she said.

Rockwood’s Gray echoed this sentiment. “Going forward, Rockwood will look at deals through its core fund that will provide at least a 9% to 11% levered return over 10 to 15 years.” In 2010, people will bid for better assets and accept a relatively low yield due to low yields on alternative investments, he said. “You would rather get a 6% yield on a building because you are only getting a 25 basis points return on your money market account.”

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