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CHICAGO-A recent report by law firm DLA Piper, based here, shows that most real estate executives now rank the current credit crisis as the most impactful event in the industry in two decades. The survey has also shown the executives do not expect stability to return to the real estate market until at least 2010, with securitized lending not returning to previous levels until at least 2011, if ever. The report surveyed 424 real estate executives in August, and is being released in conjunction with DLA Piper’s 2008 Global Real Estate Summit, to be held in Chicago Tuesday.

“One of the biggest things is an acknowledgement and analysis of what the projection of the feeling of the time period for recovery is, and when we’re going to get back to stabilized market transactions picking up to a better pace than the last 12 months,” Jay Epstien, chairman of the company’s US real estate practice, tells GlobeSt.com. “If you monitor how people have talked about the period of recovery in the last 12 months since the start of the credit crisis, each time you measured it people have had a different view. It’s pretty striking that now the overwhelming majority of answers have leapfrogged over 2009.”

Given the developments involving Lehman Brothers, AIG and Merrill Lynch in the past two weeks, the firm conducted a follow-up survey last week. In light of recent events, about 60% said they now see the current credit crisis as the event in the past 20 years which has had the largest effect on the real estate market, Epstien says. Only weeks before, 60% of respondents ranked the savings and loan crisis of the late 1980s and early ’90s as most impactful, with the current credit crisis ranked second.

“It’s not surprising that a lot of people now say it’s the credit crisis, even though I think it’s more of a reactive response to what’s happening out there,” Epstien tells GlobeSt.com. “The major difference between the savings and loan crisis and today is that in the S&L crisis, real estate was the principal driver of what was going on. Today, the principal driver is credit, or lack thereof on the finance side, and it’s not limited to real estate. Real estate is only one of the asset classes affected. It’s affecting every asset class, and that’s very different.”

Epstien says 62% of respondents, many of whom previously said they believed markets would have already recovered, now said they believe it will take at least another two years to reach stability. “Ultimately, what has to happen for the markets to come back to some sense of equilibrium is the bid-and-ask prices on assets have to get more in-line, or close enough together, that sellers who control assets are willing to take the loss and sell at whatever number the buyers are willing to pay,” Epstien says. “Until then, we stay in this situation of a semi-freeze.” He says in order for markets to come back, credit will also have to be made more readily available.

Respondents reflected this belief, citing financing and availability of credit and debt as the main concerns moving forward. About 90% of those surveyed described their 12-month outlook on the US commercial real estate market as bearish, with 71% of those respondents citing the fallout from the credit crisis, including unfavorable financing terms and lack of available debt, as reason for lack of confidence. The other 10% of survey participants described their market outlook as bullish, with 50% of those individuals attributing confidence to investment opportunities being created by the market correction/credit crunch.

“We didn’t expect the bullish/bearish split would be reversed,” Epstien says. “We were a bit surprised we only got a 10% bullish response. We might have thought that more people would have said, ‘I see opportunity in the marketplace created by this dislocation.’ Real estate has always had an entrepreneurial group of people that has always found ways to make value. It is a fine curve and it goes up and down.”

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