WASHINGTON-The need to sort out markets on the rebound from those that lag the recovery underpins investment strategies this year, said experts at the 14th Annual Transwestern Real Estate Forum Institutional Investors Symposium held here recently. “It’s real selective,” commented James J. Halliwell, managing director with Principal Real Estate Investors. “It’s really a have and have-not, and you’ve got to pick your spots.”

That’s especially true when both fundamentals and deal flow remain challenged even as the industry outlook has brightened compared to a year ago. Thomas D. Zale, managing director at Northwestern Mutual Investment Management Co., said that “so far the real estate recovery is a capital markets recovery,” with “marginal improvement” at best in fundamentals. Zale said his company is “investing as if we’re in a recovery” but has also positioned to defend itself against a double dip.

That being said, panelists agreed that sentiment has improved dramatically over the past 12 months. “I think most of us were in survival mode at this time last year,” said Roger Pratt, managing director and senior portfolio manager of Prudential Real Estate Investors. That sentiment shift is helping to buoy activity in some sectors, as evinced by improvements in office leasing and consumer spending.

If sentiment has risen in the past year, cap rates have fallen. With so much capital set aside to pursue opportunities, commented moderator Steve Pumper, assets that would have gone for a 7% to 7.25% cap rate 12 months ago now trade in the 5% range. “On the other side of the equation, the ones that have severe trauma are still waiting to be priced out,” said Pumper, executive managing director of investment services for Transwestern Commercial Services.

Pumper co-moderated the discussion with Michael G. Desiato, VP of ALM’s Real Estate Media Group. The panel also included Trevor L. Michael, managing director of global real estate and asset management for TIAA-CREF; Mark S. Higgins, chief investment officer of Cornerstone Real Estate Advisors’ equity group; and CEO James A. Stolpestad of Allianz Real Estate of America.

An edited version of the symposium, held at the Ritz-Carlton Georgetown here, appears in the July/August issue of Real Estate Forum. The entire discussion is available online via a GlobeSt.com webinar. Click here for on-demand replays of the webinar, available through Nov. 23.