Converging Growth of U.S. Cities May Create Opportunities in Overlooked Real Estate Markets.

PARSIPPANY, N.J.--(BUSINESS WIRE)--Sept. 27, 1999--

According to a new report from Prudential Real Estate Investors (PREI), the difference in growth rates between major metropolitan areas in the United States has been cut nearly in half over the past three decades, creating opportunities in real estate markets investors have traditionally excluded from their investment portfolios.

"Growth rates of the U.S. metropolitan areas have been experiencing a powerful convergence over the last three decades, which means for real estate investors the opportunity cost of focusing only on higher growth markets has steadily increased," said Willard McIntosh, managing director and head of Investment Research at PREI. "Investors certainly cannot afford to eliminate as many metropolitan areas as they have in the past."

The report indicates that growth rates among the top metropolitan statistical areas (MSAs) has been cut in half over 28 years, falling from 3.0% in 1971 to only 1.5% in 1998. In fact, growth variations are similar for any set of MSAs up to the universe of all MSAs in the United States (about 300+).

Fundamental factors driving this change are not fully understood, but the report notes several possible explanations. For example, some economists attribute converging growth to more diversified metro area economies, while others point to the restructuring of a predominantly manufacturing-based economy to a service-based one. Some economists say labor force changes and globalization have led to the changing growth rates.

The report cautions that moderating growth variations should not be mistaken as a reason to reduce diversification. "Diversification continues to be a critical tool for investors seeking to manage their risk," said McIntosh.

The report, entitled "Converging Growth of U.S. Cities," is available in its entirety on Prudential's website, www.prudential.com, as are dozens of other studies and reports that analyze trends and key issues impacting the commercial real estate industry.

PREI provides global real estate money management services to clients in the United States, Europe and Asia. PREI manages more than $12 billion in assets on behalf of over 300 institutional clients.

Prudential, with $375 billion in total assets managed and administered at year-end 1998, is the largest life insurance company in the United States and one of the largest diversified financial institutions in the world. Prudential has a global presence in 30 countries, providing a variety of products and services in the areas of insurance, investments, securities, and real estate to more than 30 million customers.