As Economy Moves Into Recession, U.S. Commercial Real Estate Markets Should Weather Downturn.

Business Editors

NEW YORK--(BUSINESS WIRE)--Oct. 18, 2001

Lend Lease Real Estate Investments and PricewaterhouseCoopers issue

Emerging Trends in Real Estate(R) 2002

As the nation's economy sinks into recession, U.S commercial real estate markets appear relatively well positioned to weather the downturn, according to Emerging Trends in Real Estate(R) 2002, the annual survey of leading real estate experts.

The report predicts investment returns for 2002 should register in the 7% to 9% range, absent an extended economic decline. Property returns in the hotel and retail sectors, however, could be hit hard by travel falloff and consumer retrenchment. In addition, the nation's leading 24-hour office markets will face softening demand and deteriorating big city fiscal outlooks. Apartment and industrial markets should hold up better.

Emerging Trends in Real Estate(R), the 62-page annual forecast published by PricewaterhouseCoopers and Lend Lease Real Estate Investments, makes these projections in its just released 2002 report, the first major industry outlook

completed since the September 11th terrorist attacks.

The report states, "2002 should mark the nadir of a sudden correction in U.S. real estate markets." But, "a potent combination of public market discipline, low interest rates and controlled supply have kept real estate markets in relative equilibrium -- ready to withstand reduced demand from the expected recessionary fallout."

Key findings of the report include:

-- The real estate markets will suffer through a two-stage downturn before
hitting bottom, driven by declining demand, not oversupply. Stage one's impact,
generally absorbed by fall 2001, was driven by the record-level of sublease
office space in "tech wreck" markets. Stage two

-- a consequence of recession amplified by September 11 -- will be felt into
2002 across all markets and will determine the extent of real estate's slump.
Given real estate's relative balance, the report expects the decline to be more
of a "dip" than bust. Recovery will be modest, limiting future upside,
especially for investors seeking more opportunistic returns.

-- The "Big Five" 24-hour cities -- New York, Washington, D.C., Boston, Chicago
and San Francisco -- remain America's top markets, but their prospects have
peaked. The souring economy, lack of federal support, failing public schools,
and chronic affordable housing shortages increase risk for investors in the
near term. In addition, the fear factor related to the recent terrorist attacks
could cast a temporary shadow on big city life. Southern California, including
the suburban expanse between Los Angeles and San Diego, also ranks high on the
survey together with the 24-hour cities.

-- The top property types for investment in 2002 will be multifamily,
industrial and community shopping centers -- all offering steady cashflows.
Office in battered high-tech markets and 24-hour CBDs, as well as well-leased
suburban properties are touted as acquisition "best bets" in the market trough.


-- Disciplined capital markets have helped maintain equilibrium while fostering
liquidity. As a result, most owners of real estate are well capitalized and
most lenders are protected entering the downturn. 2002 will be an important
year for the CMBS market as bond holders face rising delinquency and defaults.
It promises also to be a critical year for pension funds as investment
performance at cyclical bottom could determine whether plan sponsors raise
future allocations from current low levels.

-- The impact of technology will continue to be profound on the real estate
market. In particular, the flow and transparency of property information has
improved decision-making and helped stabilize markets. This information flow
acts as a circuit breaker on the markets, keeping supply and demand in far
better balance and reduces the likelihood of future boom-bust cycles.

Now in its 23rd year, Emerging Trends in Real Estate(R) is published by PricewaterhouseCoopers and Lend Lease Real Estate Investments. It is based on in-depth interviews of more than 150 leading real estate authorities, conducted by PricewaterhouseCoopers. Lend Lease writes the report. Both companies provide additional research and executive insights.

Copies of Emerging Trends in Real Estate(R) 2002 are available for $95 by emailing [e-mail] or [e-mail]. Alternatively you may call Susan Tromp, 631/234-5143 or Bonnie White, 212/554-4168.

As part of the Lend Lease Group, Lend Lease Real Estate Investments (www.lendleaserei.com) is one of the largest real estate investment managers in the world and a leading U.S. real estate advisor to pension funds. The company has $36 billion in real estate and commercial mortgages under management for institutional and private clients in the U.S.

Listed on the Australian Stock Exchange (ASX:LLC), the Lend Lease Group is an integrated global real estate organization, operating in 38 countries on five continents. In addition to investment management, Lend Lease also is a leading worldwide provider of project management, construction, development, capital structuring and consulting services.

PricewaterhouseCoopers (www.pwcglobal.com) is the world's largest professional services organization. Drawing on the knowledge and skills of more than 150,000 people in 150 countries, we help our clients solve complex business problems and measurably enhance their ability to build value, manage risk and improve performance in an Internet-enabled world.

PricewaterhouseCoopers refers to the member firms of the worldwide PricewaterhouseCoopers organization.