Bryan Cave's Barry Ross

GlobeSt.com: Talk a little first about the methodology and the mission of the survey. How many people did you go to?

Ross: The number increases each year, but the last survey went to approximately 1,400 recipients. We break it into two distinct series of questions. Every year we ask a series of questions that goes to the basic concepts of where real estate professionals feel it pays to invest, what areas of the country and what asset class. But we're also trying to elicit answers that are current and topical, so this year we talked about green construction. In years past we've discussed foreign investment and how congressional changes will impact real estate. Throughout, we're also building a database so we can take the information and show trends and such.

GlobeSt.com: Was the response to green surprisingly low?

Ross: When we framed the question, which was several months ago, I actually expected people to be somewhat negative about green because traditionally the theory was that it cost more to do and tenants and others didn't demand it. When we saw that there were a significant number of respondents who thought it was important and should be included I was surprised.

GlobeSt.com: I'm confused. The report expressed a substantial level of reluctance.

Ross: Well, if you start with the assumption that you're going to get a response of maybe 15 or 20% that would be positively disposed and you double that number, it's a positive surprise, even though it's still true that the majority don't seem to view it favorably. So I was actually expecting the number who embraced green to be much lower.

GlobeSt.com: I know the survey doesn't explore follow-up questions, but anecdotally, why did it score as low as it did?

Ross: I suspect that it's a combination of things. There's a natural fear in development that every cost has a risk of increasing, and certainly it's true. So when you have an unknown, and some of these technologies are still relatively unknown, there's reluctance. This is especially true with some construction-lending requirements getting tighter, it creates caution when there isn't a sense of an immediate payoff. Also, you need to look at the construction that's going on. For example, a developer isn't going to reap those benefits in a condominium he's selling. So, I don't know that green resonates in all markets.

GlobeSt.com: It seems to be in the office sector.

Ross: The buildings that seem to be embracing it are the large office buildings, where the developers are much more sophisticated. They're building buildings that cost $400 million or $500 million. They're looking at every aspect and they're dealing with end users who are asking questions about such things because of corporate culture. So it's a dynamic that's more accepted in that scenario than in your basic construction where the user might be more concerned about cost. But more than anything, I think it's a fear of the unknown.

GlobeSt.com: Let's look at some other areas the survey covered. It says some 55% of your respondents are likely to invest overseas. How does that compare with last year?

Ross: One of the things that has changed is that a year or two ago, Asia was a focus. Everyone was excited about China, although even then it wasn't the place most people talked about, most like places closer to home and with a closer cultural fit: Canada, Mexico, Europe and Eastern Europe. Asia has receded a little bit. In '05 and '06, those who said investment there was highly likely amounted to 46% and 45% respectively. This year it is 38%.

GlobeSt.com: And what about foreign investment overall?

Ross: When we first got the results three years ago, we were surprised at how many people--more than 50%--were considering pursuing foreign investments. We're thinking about asking how many people actually have invested. I would guess that there is a fairly dramatic difference between aspirations and actual investment.

The question I've always found most interesting is if people think real estate is overvalued. In the first year--'04--55% said yes. In '05 it was 54 and in '06 it was 59. This year it was 58. So it's been fairly consistent; every year for four years people have been saying it's overvalued, but my personal conclusion is that it can't be if people are continuing to pay the prices they're paying. It's just a new paradigm for value.

GlobeSt.com: Which brings me to my new favorite question, given the dynamics of the time. Have we peaked yet?

Ross: I would've answered that question yes over the past two or three years and I would have been wrong each time. I have learned to shut my mouth and not make any predictions about whether or not we have peaked.