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PHOENIX-The tug-of-war between sellers who feel the market will return and buyers who want to purchase buildings at bargain rates, will result in a flat investment market in 2002, predicts Grubb & Ellis. “Most sellers will be unwilling to discount prices to satisfy buyers’ conservative underwriting standards,” according to a Grubb & Ellis forecast.

This will be especially true for owners of office buildings.

Although office buildings have been hammered by rising vacancy rates, relatively low debt service will allow owners to patiently solve their vacancy issues, rather than sell at low prices.

“Most distressed projects that would justify lower pricing will not be offered for sale,” Grubb & Ellis says. “However, some value-added opportunities may arise from newly developed office projects with high leverage that have been slow to lease.”

As far as the industrial market, some institutional holders will pare some non-core assets, creating “unique investment opportunities for private-equity investors and tax-deferred exchange buyers,” the company predicts.

The retail market is the one area that should offer a “plethora of investment opportunities” next year, Grubb & Ellis predicts.

Some 15 million sf of retail space is either planned or under construction, including more than 30 grocery-anchored centers.

“For investors seeking higher returns, second-tier retail properties, financed with historically low interest debt, present the opportunity to achiever returns unimaginable in recent years,” Grubb & Ellis says.

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