Everybody in real estate should keep an eye on the unemployment rate. The jobs picture will determine how bad the real estate markets get. If companies keep up modest hiring and avoid layoffs, real estate can skate through the rough patch, and recent economic weakness will turn out to be relatively benign. But if companies start announcing hiring freezes and layoffs pick up, watch out. That's when office markets suffer retrenchments, business travelers cut back on hotels, and consumers really shut down at the mall. Only recently have employment numbers shown signs of deteriorating.

Expect all the gloom and doom talk, including recent grudging admissions about economic distress from the Administration, to coax business managers into play-it-safe rentrenchment mode. For any remaining Pollyannas out there, Tuesday's huge rate cut certainly signals that there are problems to confront. For most companies, this is no time to launch new initiatives unless you're in businesses that take advantage of potential distress.

As we have noted before, real estate asset managers and workout artists certainly will be in more demand. And a notable survey recently completed by Bill Ferguson and FPL Advisory finds lingering optimism among real estate executives, despite some caution. The FPL report says a majority of firms plan to add staff and increase compensation in 2008 with a focus on asset and portfolio management talents.

According to Ferguson, FPL´s co-Chairman andco-CEO, two-thirds of senior U.S. real estate executives responding to hisfirm´s annual hiring and compensation survey expect toadd staff in 2008. And while double-digit compensation increases will becomeless common, the vast majority of respondents do expect pay levels to increaseat least moderately across the industry.

Ferguson says: "Given the well-publicizedproblems in the debt markets and generalized concern over the health of theeconomy, these results seem counterintuitive. We haven´tseen a precipitous drop in demand for talent. Rather, strong underlyingfundamentals and the continued availability of large amounts of equity capitalhave resulted in a hiring environment that is much more robust than the marketsmay indicate. One of our clients has seen their stock price drop 40% in the lasttwo months, but the underlying business is still good. They´re still hiring." The full survey report is available at http://www.fpladvisorygroup.com.

Particularly surprising is the finding that nearly half of all commercialmortgage firms surveyed intend to hire new staff even despite the recentslowdown in lending. "Certainly, originations activityhas slowed dramatically, and there has been a decrease in demand forunderwriting professionals as a whole," explainedFerguson. "However, the best and brightest of thisgroup are in greater demand than ever as companies -particularly direct lenders who are getting into the game now that the conduitshave fallen back - seek underwriting talent with theknowledge and skills necessary to be successful in an environment of tighterunderwriting standards. Furthermore, as many companies move away fromoriginations, there´s burgeoning demand for experts inservicing as well as in workouts and restructuring, as lenders focus onidentifying and managing under-performing loans."

Commercial real estate performance tends to lag the rest of the economy. It's my hunch real estate honchos will be less upbeat in a few months. But there is no doubt about it--asset managers and trouble shooters, you're time has come.

(Miller Ryan LLC has a business alliance with FPL Advisory)

© Miller Ryan LLC 2008

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Jonathan D. Miller

A marketing communication strategist who turned to real estate analysis, Jonathan D. Miller is a foremost interpreter of 21st citistate futures – cities and suburbs alike – seen through the lens of lifestyles and market realities. For more than 20 years (1992-2013), Miller authored Emerging Trends in Real Estate, the leading commercial real estate industry outlook report, published annually by PricewaterhouseCoopers and the Urban Land Institute (ULI). He has lectures frequently on trends in real estate, including the future of America's major 24-hour urban centers and sprawling suburbs. He also has been author of ULI’s annual forecasts on infrastructure and its What’s Next? series of forecasts. On a weekly basis, he writes the Trendczar blog for GlobeStreet.com, the real estate news website. Outside his published forecasting work, Miller is a prominent communications/institutional investor-marketing strategist and partner in Miller Ryan LLC, helping corporate clients develop and execute branding and communications programs. He led the re-branding of GMAC Commercial Mortgage to Capmark Financial Group Inc. and he was part of the management team that helped build Equitable Real Estate Investment Management, Inc. (subsequently Lend Lease Real Estate Investments, Inc.) into the leading real estate advisor to pension funds and other real institutional investors. He joined the Equitable Life Assurance Society of the U.S. in 1981, moving to Equitable Real Estate in 1984 as head of Corporate/Marketing Communications. In the 1980's he managed relations for several of the country's most prominent real estate developments including New York's Trump Tower and the Equitable Center. Earlier in his career, Miller was a reporter for Gannett Newspapers. He is a member of the Citistates Group and a board member of NYC Outward Bound Schools and the Center for Employment Opportunities.