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BOSTON-Most economic indicators point to a recovery for the nation’s real estate market according to speakers at the 2003 National Office and Industrial Properties Annual Conference held here.

Stephen Fuller, professor of public policy and regional development at George Mason University notes that unemployment rates are going to go down and the GDP is going to get stronger. “Next year will be the best year of the decade,” he announced to the packed room. The confluence of a number of factors–including low interest rates and increasing business investment–are all in place to rev up the economy, he says. But Fuller warns that local public policies that are in place could stymie new development.

“New development is viewed as a cash cow,” he says. “Almost every state has budget problems and they will continue to add fees.” He emphasized that because local governments don’t look past the upcoming few years, they discourage, rather than encourage smart growth. “We need to educate the public about the positives of land development and growth,” he added.

Susan Hudson-Wilson, CEO of Property & Portfolio Research, also emphasized that a great recovery scenario is about to happen. “Get in that path now,” she said. “There are many opportunities to see where growth and absorption is happening.” Real estate, she added, is where investors want to put their money. “Real estate has been a winner. It’s exactly what the doctor ordered.” Because of concerns over the stock and bond markets investors are looking to put their money in properties. She noted that some bond portfolios she is familiar with are even thinking of investing in real estate.

Wilson pointed out that the current demographics of a higher than replacement birth rate means that office absorption is going to go up. But she warned that those demographics, which indicate that the long term labor force will decline, are going to cause the office market to hit a demand wall. She predicted that when the unemployment rate crosses its prior low of about 3.9% developers need to start getting concerned about the forecast for office absorption.

“The office industry is at risk of overbuilding,” she said. “It won’t look like overbuilding but it will be too much. We need to watch out for this. If demand is weak it’s okay as long as supply is commensurate with that.”

Wilson believes that the multifamily market has been greatly overblown, mainly because the two largest renter groups–young singles and the elderly–are in decline. She stressed that those properties are currently not the right investments to make for at least the next three to five years but she is equally emphatic that the retail market is poised to boom. “There are growing numbers of bodies supporting retail sales,” she said. But Wilson cautions that the traditional retail stores–such as Macy’s and Sear’s–are on their way out in favor of value retailers. She predicted that a process of “re-malling” will happen shortly. “Retail gives the best value than any property type.”

The warehouse market is also poised for a great recovery, said Wilson, as there is a restocking of inventory and there will be a rush for demand of space. But new technology such as radio frequency transmitters could ultimately impact that demand. “It is a risk to the market and is something to be aware of,” she warned.

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