Real estate experts expect financial and real estate markets to bottom in 2009 and then falter for much of 2010, with continued drops in property values and additional foreclosures, according to the 2009 Emerging Trends in Real Estate report released by the Urban Land Institute and PricewaterhouseCoopers.

But there are a few bright spots in this rather gloomy forecast. At the top of the list: Apartments are the best opportunity investment next year, according to the report, which includes interviews and survey responses from more than 600 leading real estate experts, developers, lenders, brokers, and consultants.

“Even though there is a lot of doom and gloom in terms of the fundamentals, interviewees really believe that 2009 is a great time to buy,” says Susan Smith, director in the real estate business advisory services group at New York City-based PricewaterhouseCoopers. “The No. 1 buy is apartments. One of the main reasons is that interviewees see a very diverse economic and demographic demand for apartments, especially for transit-oriented housing.”

Warehouses are also a popular property pick, as they tend to offer steady returns despite economic declines, Smith says. The office sector, which fell in the middle, had a delayed reaction to the economic crisis but will continue to feel the brunt of the pain for some time. Retail is the least-preferred property type, due to the dramatic decline in consumer spending in the past few months.

Looking ahead to 2010, expect to see some turnaround in all market sectors. “The good news will probably outweigh the bad; right now, it is the reverse,” Smith says. What will 2011 bring? The respondents are banking on a recovery.


    • Invest in maturity defaults, construction loans/bridge loans, or take mezzanine positions and equity stakes in properties.
    • Invest in REITs as they will lead the market's recovery.
    • Focus on global pathway markets, including 24-hour coastal cities.
    • Staff up asset managers, leasing pros, and workout specialists; separate good assets from the bad.
    • Buy or hold multifamily; hold office; hold hotels; buy residential building lots, but be prepared to hold.

Source: Emerging Trends in Real Estate report