The execs made their remarks on a panel at a Friday conference organized by the Beverly Hills-based Real Estate Conference Group. GlobeSt.com and two of its sister print publications, the national Real Estate Forum and LA-based Real Estate Southern California, were media sponsors of the event.
"Real estate markets are healthy, but we won't see as much growth as in 2000," said David L. Knowles, managing director of Merrill Lynch Investment Banking, as he addressed an audience of about 1,000 professionals from across the nation. The other panel members agreed that there will be a definite slowdown in commercial real estate over the coming months, with the office sector being one of the hardest hit market segments.
Some product types and markets will fare better than others, the panelists said. For example, most agreed that apartment property in Southern California, where vacancies have already dropped to record lows of about 2% in Orange and San Diego counties, will continue to outperform the overall real estate market and prices will keep rising. "Multifamily has a lot of liquidity and many deals," said Jerrold Barag, CEO of Lend Lease Real Estate.
Overall, Barag said he does not anticipate major overbuilding in any part of the Southland market. "Future supply will be very restrained," he said.
As the overall market slows, there will be fewer buyers vying for property, giving opportunistic investors a chance to get in on some great deals. "There is a multitude of opportunity," said Stephen M. Steppe, a principal at investment giant RREEF. "Market rates are declining and real rates have returned. It's a great time to be buying real estate."
The panel was moderated by Michael G. Desiato, editorial director of GlobeSt.com and group managing director of New York-based Real Estate Media Inc., parent of GlobeSt, Real Estate Forum and its five regional commercial real estate publications.
When Desiato asked the panelists what they would buy if they were given $500 million each, some said they'd use the cash to make core investments. But David Margulies, formerly a partner at Apollo Real Estate Advisors, hinted that he'd be prone to think outside the box: "If you do what everyone else does," he quipped, "you will get everyone else's returns."
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