According to Hendrickson, pricing on quality assets hasn’t been established yet. “We raised money and have been very patient,” he said. “But there is still a big disconnect between quality, class A product and class B assets. In fact, class A retail properties are trading at heyday prices, so we don’t see this as a good investment.” Instead, FRIT is investing in its own assets. “Out of the 13 properties we have in Philadelphia, we are redeveloping eight of them.”

Korman Communities is also investing heavily in capital improvements and they are bullish on the region. “As good buyers get squeezed out of Washington, DC and New York City, more investors will come here,” he observed. And multifamily, at least, is actually beginning to gain some traction. “The agencies are there as well as life companies, regional banks and even some CMBS. In fact, cap rates for class A apartment assets are around 4.5% to 5%.” But Korman did note that there is some concern about the agencies’ long-term health. “There will be a huge impact on cap rates if the agencies are less efficient,” he said.

But while Center City might be showing signs of improving fundamentals, the suburbs are another story, so said Robert Walters, executive managing director of CB Richard Ellis, during the day’s second panel, The Transactions Outlook: Deal-Flow Forecast, which was moderated by Rich McGuckin, director of leasing at Brandywine Realty Trust. Walters noted that areas like Malvern and King of Prussia have stayed predominately flat, at least when it comes to office. Industrial, on the other hand, is showing some real signs of improvement.

“It’s really a tale of two markets when it comes to office and industrial here,” said Anthony J. Hayden, principal of MIM/Hayden Real Estate Fund. “Distress in the office market needs to work its way through the system before I see fundamentals picking up here.” But he noted that it will lead to some good opportunities for investing in office product.

David Binswanger, president of Binswanger, agreed, adding that the wait is over and people are now starting to invest. “People are starting to move some capital,” he noted. “This should trigger a chain of events that will also be positive for the suburbs.”

Of course, you can’t have a conference in Philadelphia and ignore eds and meds. “On the pharma side, we will continue to see mergers and acquisitions,” said Michael McCurdy, marketing director at Jones Lang LaSalle. “Pharmaceutical companies are trying to figure out how best to use their buildings, especially R&D labs, which tend to look empty. So expect some reconfiguring of spaces.”

Meanwhile, the University of Pennsylvania is in the midst of a $6-billion, 30-year building program that is starting to impact the look and feel of University City here, said Heather Smith, senior vice president and branch manager of Studley. One area that all of the panelists agreed is worth watching is the impending changes to how leases are classified on balance sheets.

“There is a potential paradigm shift,” said Binswanger. “In 24 months, the Financial Accounting Standards Board is going to put leases on balance sheets, and it’s going to have a huge impact on how we do business.”