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SAN FRANCISCO-The Urban Land Institute’s mid-year report showed that its members have moved San Francisco to the bottom of the barrel when polled on their favorite investment markets. Those surveyed said that the dot-com failure and the high vacancy rates in San Francisco contributed to its status as a high-risk investment city.

Still, Wareham Development found an investor to buy one of its Downtown Berkeley properties. A San Francisco-based venture group, Constitution Square LLC, has purchased the 75-year-old Constitution Square Building for $8.5 million. CB Richard Ellis brokered the sale on behalf of the seller, while Colliers International represented the buyer.

According to Wareham, the Constitution Square Building, renovated in 1985, is considered one of the Bay Area’s finest examples of historic landmark revitalization. The seismically retrofitted 40,000 square-foot building offers two stories of office space above ground-floor retail and is home to tenants such as the University of California, Molecular Sciences Institute, Public Health Institute, See’s Candies, and Java City.

According to ULI’s mid-year forecast, the U.S. economy is expected to grow 2.5 percent in 2002 and 4 percent in 2003. Considerable deterioration in commercial property performance occurred in 2001, and ULI expects this trend will continue at least through the end of 2002.

The prospects for attractive rent increases for most commercial properties are fair to poor over the coming year, and investment returns will be well below 2001 returns, according to ULI. Prospects for rent growth are best for multifamily housing, neighborhood/community shopping centers, and warehouse industrial, while upscale/luxury hotels, high-rise suburban offices, resort hotels, and downtown offices have the poorest prospects.

The ULI says construction starts will decline sharply in most commercial property sectors, and attractive development opportunities will be hard to find and difficult to finance.

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