companies are hiring they need
more office space, and when
they are downsizing they need
less space. The office sector is
extremely market-dependent
compared with some other sectors. For example, San Francisco
is not doing well at all, but the
office market in Washington,
D.C., is off the charts.
For the multifamily sector,
household formation is the main
indicator, although this is also
tied in with job growth. As young
people just out of college find
jobs, they’ll start moving out of
their parents’ basements and into
their own apartments. Apartments should do well in 2010—
and even more in 2011—because
there will be a shortage of space
as the echo boomers get jobs and
because of the slowdown in multifamily production.
Malls are pretty stable, and I
think they are going in the right
direction for next year. I think
the economy has hit bottom,
and people will start spending
again next year.
Hospitality is the one sector
which is affected the most rapidly
by market changes, so it has been
hurt the most. But I believe we’ve
hit bottom, so the hospitality industry will pick up quickly along
with the economic recovery.
internal funds model.
In the long term, REITs that
bought or developed real estate
in 2007, for instance, can’t af-
ford to sell it for a loss, so they
will be getting management fees
for a long time. It makes sense
to move away from the internal
funds model and to diversify
capital, and investors may not
want to rely on management
fees for the long term, but it
would be impossible to make an
instant switch. F
4What kind of role do you think the internal funds
business model will play in the
REIT market going forward?
Different REITs have to solve
the leverage levels on their
funds, but they can’t do something instantaneous or dramatic.
It’s great to return to the basics,
but nothing can move that
quickly. Raising private capital
for real estate investment right
now is tough, so it will be hard
to shift away quickly from the
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