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

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That’s especially true when both fundamentals and deal flowremain challenged even as the industry outlook has brightenedcompared to a year ago. Thomas D. Zale, managing director atNorthwestern Mutual Investment Management Co., said that “so farthe real estate recovery is a capital markets recovery,” with“marginal improvement” at best in fundamentals. Zale said hiscompany is “investing as if we’re in a recovery” but has alsopositioned to defend itself against a double dip.

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That being said, panelists agreed that sentiment has improveddramatically over the past 12 months. “I think most of us were insurvival mode at this time last year,” said Roger Pratt, managingdirector and senior portfolio manager of Prudential Real EstateInvestors. That sentiment shift is helping to buoy activity in somesectors, as evinced by improvements in office leasing and consumerspending.

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If sentiment has risen in the past year, cap rates have fallen.With so much capital set aside to pursue opportunities, commentedmoderator Steve Pumper, assets that would have gone for a 7% to7.25% cap rate 12 months ago now trade in the 5% range. “On theother side of the equation, the ones that have severe trauma arestill waiting to be priced out,” said Pumper, executive managingdirector of investment services for Transwestern CommercialServices.

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

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An edited version of the symposium, held at the Ritz-CarltonGeorgetown here, appears in the July/August issue of RealEstate Forum. The entire discussion is available online via aGlobeSt.com webinar. Click here for on-demand replays of the webinar, availablethrough Nov. 23.

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Paul Bubny

Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.