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.”

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.

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.