Condominium conversion projects are taking off in the metro area and "low interest rates will encourage additional conversions," says Nadji. "Well-located, upscale properties could offer significant gains to investors willing to fund a conversion."

Sales activity was moderate in 2003, with the market recording over $200 million in sales volume. Most of the investments sold were in the northern parts of the metropolitan statistical area. "Owners of more distressed properties in these areas may be willing to sell, as they are located further from the epicenter of the region's hospitality employers, and may anticipate a longer road to increased profitability," Nadji says.

However, owners in the southern section of the MSA are "on the verge of a boost in revenue, due to lower vacancies and increasing rents, and are thus more likely to hold their properties," he says.

Another trend the M&M researcher is seeing is falling cap rates. "With buyers outnumbering sellers, a trend that is likely to continue until interest rates increase significantly, cap rates have fallen to the mid-to-low-8% range, and prices have been pushed upward," Nadji says.