NEW YORK CITY-Locally based PricewaterhouseCoopers' Q4 2006 Korpacz Real Estate Investor Survey found that while vacancy decreased and rental rates rose the number of transactions dropped significantly. Office remains the strongest property type across all the US markets, with retail, multifamily and industrial trailing behind."Fundamentals are strong; the economy is stable; and capital remains plentiful," says William Croteau, US Real Estate Sector leader for PWC, in a statement. "Those factors, combined with a lack of alternative investment opportunities, are encouraging a growing number of property owners to hold onto their existing assets and enjoy the benefits that arise from improving fundamentals."

Investors in Q4 focused mostly on coastal, land-locked cities, such as Manhattan, Miami, Los Angeles, Seattle and Washington, DC. Southern cities that connect both coasts, like Charlotte, Atlanta, Phoenix and Austin also garnered interest.

PWC reports that of the 30 central business districts it charts 23 posted year-over-year declines in office vacancy, with an average of 120 basis points. Philadelphia, Atlanta and Downtown Manhattan saw the most significant declines. The southern part of Manhattan saw a drop of 220 basis points.

The apartment market, which has an average of 5.4% vacancy nationally, offers more room for concern according to PWC. Units slated for condominium conversion could return to the rental market. In a release about the survey's findings, PWC says "For example, between the third quarter of 2005 and the third quarter of 2006, the number of condo conversions fell from 54,700 units to 7,400 units. In markets where conversion activity was particularly rife, such as South Florida and California, the return of numerous condo units to the rental market poses a significant threat to apartment vacancy rates."

Executives from PWC could not be reached in time for publication. Peter Korpacz, director of Global Real Estate Research for PWC says in a statement, "Some of the decline may be due to a shortage of quality offerings," added. "While there is no lack of qualified buyers, many seem to be encountering an array of mitigating challenges--such as undesirable tenant mixes, poor locations, heightened competition and unrealistic pricing."