"A prolonged economic recovery does not bode well for REITs," advised Lesia Bates Moss, senior analyst. She said Moody's is working with REITs to provide information not included in financials to have an accurate and full picture of companies."REIT managements need to keep portfolio's competitive," she advised.

Moody's chief economist John Lonski pointed out that while the economy is proving to be "less of an adversary" than in the recession of 1990-91, private-sector employment has not grown quarterly since early 2001. "Employment leads capital spending," he noted, adding that there is every reason to believe that 2003 is where construction activity for offices will decline. "Employment will lead office construction recovery."

Karen Nickerson, CPA, senior analyst, cautioned that secondary markets such as neighborhood, grocery and community centers are vulnerable to big box and supercenters. She added that power centers are rising in stability and value. Nickerson also noted that unemployment is hurting occupancy in the multifamily sector and that low interest rates support home ownership. Also, a new supply is eroding the performance of existing properties.