GlobeSt.com: In analyzing the data, what did you find was the biggest surprise?

Sempere: There were a couple of things. I was impressed with the continued resiliency of the retail sector over the past few quarters, although it's waning. Consumer spending is still fueling the economy, but it seems to be slowing down, given the way July and August retail sales failed to meet economists' predictions. Our expectations are that there will be continued slowing in retail, but it's not going to turn negative. Another surprise was the strong price appreciation in both the retail and the apartment sector. In apartments, the year-over-year increase was 5.5%, and it was 7.8% in the retail sector. Overall, I'm surprised that real estate continues to do as well as it does.

GlobeSt.com: Because . . .

Sempere: Because of the greater market discipline recently that's limiting development as well as the fundamental shift of real estate from a pure private-market play to a public-market play. The public markets have helped moderate capital flow. That's why we haven't seen the boom-and-bust cycles we saw in the '80s. Also, the amount of equity going into deals helps to minimize risk.

GlobeSt.com: While what you say about the public market is true, private capital is certainly making its mark.

Sempere: Private equity is going to play an increasingly large role. The tax breaks private investors have received over the past few years are putting more money in the individual's pockets, and there's an estimated $6 trillion in inheritance money expected in the coming years. These individuals tend to invest rather than consume, and as investors they're not bound by all of the limitations placed on the institutions.

GlobeSt.com: But at the same time, doesn't that promise a continuation of too many dollars chasing too few deals?

Sempere: The institutional money will always chase the trophy properties, and they will win out in the end. But the general long-term trends are actually behind private equity. And that's where we come in. The teaming we've done with GlobeSt provides market intelligence that's accessible to all investors. The reason that's so important now is because determining value is no longer a simple linear equation. You have to look at a variety of factors that you didn't have to look at five years ago--local market dynamics, competition, economics and the changes in demographics.

GlobeSt.com: But that's always been true.

Sempere: It has, but the difference is that data is now available that used to be the exclusive domain of institutional investors who could afford to either acquire it or develop it themselves. This levels the playing field, which is good for everybody. We're also providing better transparency.

GlobeSt.com: Of all of the trends you've mentioned, what worries you?

Sempere: There's a lot of talk about the disconnect between pricing and values. I think it's been overplayed. It's not so much a disconnect as much as a timing issue. These investors recognize value and are basically paying up now for the long-term value appreciation. If you really believe that lower cap rates are a cyclical thing, you should sell everything you have now.

GlobeSt.com: So, sector by sector, what's the outlook for 2005?

Sempere: In terms of value and investment activity, the most momentum is in apartments, in part because of a somewhat improved employment picture but mostly because the change in interest rates will fuel more direction into the sector.
    The most stable sector right now is industrial. The economy is recovering and the goods have to be stored somewhere. We had concerns about overbuilding, but the pipeline seems to have reduced itself. One of the keys to holding the line is keeping the flow of new product at a manageable rate.
    The retail sector is the priciest. The good news is that it's been the single property category where performance has been healthy. The bad news is that some of the yield has been wrung out of the value and momentum has slowed along with sales.
    Suburban office has bottomed out. Of all the sectors we looked at it was the only one with a negative national year-on-year return. But the momentum this quarter is a good sign and the best deals are still to be had.
    Finally, while the report didn't cover lodging, the recovery is on, and all the parameters--such as room rate and RevPar--are all strong compared to last year. Furthermore, 10 markets show year-over-year RevPar increases of greater than 15%. That's a dramatic improvement. Barring any major negatives, such as more hurricanes in the Southeast or terrorist attacks, the market will continue to be positive.