According to the report, despite the softening economy, real estate continues to perform well. REITs in particular, notes the report, offer strong relative value. For the year 2000, the Morgan Stanley REIT Index was up 26.8%. The Index had a 7% total return just in December.

"Our thinking is that capital markets have been anticipating a worse situation than there really is," Michael Acton, vice president of AEW Capital Markets and principal author of the report tells GlobeSt.com. As far as the main REITs in this area, Acton points to Boston Properties and Equity Office Properties as two companies that are highly regarded and good indications of REITs that offer good value. "The biggest REIT exposure here is in the office sector," he notes.

Nationally there were negative absorption rates in the office market with San Francisco the worst with a negative absorption rate of –2.5%. Boston's negative absorption rate was –1.5%. Acton insists that that drop here is all part of an anticipated cycle. He notes that the last couple of years here have been phenomenal.