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 (Chicago, Feb.17, 2009)  The nation’s economy may not start improving for six to 18 months according to experts assessing the future at a series of economic forecast seminars held during the past few weeks by six chapters of the Institute of Real Estate Management (IREM^®) from around the country. The six chapters span the nation: Rhode Island, Minnesota, St. Louis, Greater Washington (DC), Phoenix and the San Francisco Bay Area.

The consensus coursing through the seminars is that the current recession will persist beyond 2009, some saying it will last as long as five years. Values will continue to drop until capital markets clear and bad debt is taken off lenders’ balance sheets. Opportunities now “are there,” with owners strapped with too much debt who are desperate to sell assets at a steep discount to raise cash.
           
The experts agree that depressed personal incomes and profit opportunities will persist through at least 2009 before any recovery begins. Unemployment will remain high and accessible home equity low. “The (home) foreclosure situation must be stabilized before the economy can turn the corner,” say many.
           
Increased competition will persist for residential and commercial tenants in all property sectors. A return to “normal” may be as much as five years away,
           
The relatively bright spot is the Metro Washington area where, as one expert observed, “While the market will be declining from our standpoint, it still is much stronger than many areas of the country.”    

RETURNING TO BASICS
“Because real estate owners and investors can no longer count on leverage and appreciation to deliver the returns they desire, their property management model for investment real estate is returning to the basics,” said IREM President Pamela W. Monroe, CPM^®. “The focus during this recession, therefore, is on driving net operating income by minimizing operating expenses.  As more and more distressed real estate assets come on stream, the need for superior real estate management, especially marketing and leasing skills, is becoming more and more apparent.  IREM members fill this need,” Monroe said.  “As well, they know how to salvage, maintain, reshape and remarket real estate assets.  And IREM is stepping up its efforts to help them perform even better during this most severe economic challenge of our generation.”

A major thrust is the updating of IREMFIRST (For Information, Resources, Solutions and Training), the Institute’s highly interactive, comprehensive online information resource with a major segment devoted to “Troubled Properties.” It draws on constantly updated “gold standard” course materials, webinars, message boards, special presentations and sources of current news related to the industry.

OUTLOOK SPECIFICS VARY BY MARKETS
Outlooks are generally similar from market to market, attendees at all of the IREM chapter economic forecast events were told, though specifics vary. Standing out as most encouraging are the expectations for the Metro Washington (DC) area, currently viewed as stronger and more optimistic than the other five markets (likely, perhaps, because government and government-related enterprise is relatively impervious to the national trend toward business contraction). “Washington Metro will be the only office market in the country to record positive absorption in 2009,” according to one expert. The other markets are more sensitive to major businesses that shape their character, such as St. Louis, where the fortunes of Monsanto. Ford and Anheuser-Busch ripple significantly through the economy of the area.

RETAIL
Retail in Rhode Island is suffering from declining population and weakening financial conditions as are office, multifamily and industrial properties there. In St. Louis, with unemployment up and accessible home equity dropping, high-end retail (including food) is declining while sales at drug and discount stores are rising as people search for lower prices and stay-at-home entertainment. Increased vacancies and bankruptcies are driving increased competition for tenants. Many St. Louis developers, attendees at the local IREM Chapter event were told, have found themselves with build-to-suit properties made for tenants that have gone bankrupt, leaving the developers with retail property unsuitable for general leasing.
           
Minnesota is seeing continuing steep declines in retail, with the negative growth generating the lowest level of confidence among all the major property sectors. Minimal to no new construction is projected due to construction costs that are too high, while land costs are increasing. Vacancies in retail are expected to range from 15 to 20% in the San Francisco Bay area in 2009. Retailers in Phoenix are closing stores because they cannot get credit.          

OFFICE
Much the same outlook is seen for office properties as for retail, except in the Washington Metro area, which is expected to experience positive absorption in 2009. In Rhode Island, attendees at the local IREM chapter event were told, declining income and deteriorating expectations for the future economy hang over this property sector as it does over industrial and multifamily. Phoenix is expected to see increasing vacancies. Downtown St. Louis is seeing minimal absorption with some tenants just swapping B for A space and others simply trying to consolidate many locations acquired through mergers. With a drop in demand and an oversupply of product in St. Louis, asking rates are at the low end of the national scale (i.e. $22.42 psf).

Sales will continue to be slow, with strict underwriting rules and high loan-to-value ratios. Landlord concessions will continue in the St. Louis area, but most deals will be short term, as tenants want to stay put until the market clears.
           
Minnesota presents a similar picture, with office rent growth flat or negative as vacancies increase along with unemployment. And minimal to no new construction is foreseen, except for that already underway.

MULTIFAMILY
Again markets vary significantly. While Washington Metro is expected to be a slow market in 2009, it will not see a sharp decline. Phoenix is expected to endure high delinquencies and concessions as layoffs increase. Expectations for Minnesota are for a steady market with vacancies remaining stable at 5 to 7 % and positive rent growth.

INDUSTRIAL
No growth is expected anywhere in the industrial sector, attendees at all of the IREM chapter forecast events were told, with considerable vacancy overhanging this sector.

ABOUT THE INSTITUTE OF REAL ESTATE MANAGEMENT
The Institute of Real Estate Management (IREM®) is celebrating its 75th anniversary in 2008.  Major sponsors of the year-long celebration areYardi Systems, a leading provider of high-performance software solutions for the real estate industry, and the REALTORS® Commercial Alliance (RCA), the collective commercial constituency within the National Association of REALTORS®.

For more than seven decades, IREM has been the source for education, resources, information, and membership for real estate management professionals. An affiliate of the National Association of Realtors®, IREM is the only professional real estate management association serving both the multi-family and commercial real estate sectors. With 80 U.S. chapters, eight international chapters, and several other partnerships around the globe, IREM is an international organization that also serves as an advocate on issues affecting the real estate management industry.

Membership includes more than 18,000 individual members and 500 corporate members. IREM promotes ethical real estate management practices through its credentialed membership programs, including the Certified Property Manager® (CPM®) designation, the Accredited Residential Manager® (ARM®) certification, the ACoMcertification, and the Accredited Management Organization® (AMO®) accreditation. These esteemed credentials certify competence and professionalism for those engaged in real estate management. In addition, IREM offers Associate, Student and Academic memberships.

Collectively, IREM CPM® Members in the United States manage over $1.5 trillion in real estate assets, including 8.4 million residential units and 8.4 billion net square feet of commercial space. An additional 977,400 residential units are managed by IREM ARM® Members. IREM Members are employed by some of the most prestigious real estate firms in the world and nearly 70% hold upper-level management positions. Due to their professionalism and vast experience, property owners and investors worldwide continually seek out the management services of IREM Members.

To learn more about the Institute of Real Estate Management and its chapter network, call (800) 837-0706, Ext. 4650 (outside the U.S. call (312) 329-6000) or visit www.irem.org.