Landauer Forecast recommends prudent investment.

Landauer Forecast recommends prudent investment

Liquidity, the paramount concern for the real estate industry today, will gradually be restored in the coming year; nonetheless the mood will remain somber until 1993 for investors, predicts Landauer Associates, the international real estate counseling firm, which has just published the "Landauer 1992 Real Estate Market Forecast."

The report gives an analysis of the national economy and detailed coverage on current conditions in the office, retail, industrial, residential and hotel markets throughout the country. Featured in the Forecast are Landauer's new proprietary Apartment Consolidated Indicators Scale (ACIS) which ranks 30 apartment markets and the Market Equilibrium Forecast, a 5-year projection of the relative market strength for hotels in 25 cities. These ratings join the company's familiar Office Momentum Index, Retail Matrix and Industrial Market Power Ratings in the 32-page comprehensive report.

"Business credit will be more available in 1992," says Hugh F. Kelly, Landauer's real estate/economic analyst and editor of the Forecast, "and consolidations among life insurers will be more common. Real estate lenders can be expected to reconfigure their balance sheets aggressively, with liquidation sales as only one component of their strategy and creditors in possession actively seeking to form alliances with large corporate tenants. It will not be until 1993, however, that confidence in an economic recovery will result in a significant resumption of demand for real estate.

"Astute offshore investors will discover the opportunity to use their strong purchasing power and the heavily discounted prices of American property to implement buy-and-hold strategies," James L. Mooney, Landauer's chief executive officer, observed. "Low U.S. interest rates and a struggling economic recovery conspire to push the value of the dollar down as our real estate markets approach their trough. These circumstances will be seized by bold investors."

Highlights of five major property types in the report include:

As an asset class the office market sustained a one-year decline in value of 11.4 percent with 554 million square feet of vacant offices overhanging the nation's 3.2 billion square foot inventory, according to Landauer's research. Little interest in office investments will be seen in 1992 with the major markets covered by the Momentum Index especially suspect. Investors willing to entertain the risks of smaller, more specialized markets should look to office buildings in Portland, Sacramento, Salt Lake City and Milwaukee.

Retail properties, on the other hand, recorded the best returns of any property type in 1991. The economic recovery of the Southern states, particularly Texas, has led to considerable improvement for Dallas and Houston, according to Landauer's Retail Matrix ratings. Conversely, the East Coast and California are suffering a decline in retail volumes. Value creation and value enhancement of retail properties will be the watchwords for investors for the next several years, and exceptional management is of paramount importance.

The Forecast cites the industrial property class as fundamentally strong and ready to capture the benefits of economic recovery earlier than any other property types. In the report's Power Ratings, Raleigh-Durham ranked first in R & D markets, while Seattle and Charlotte are among the top light assembly markets.

Multi-family housing was the pension fund investors' preference in 1991. The new Landauer Apartment Consolidated Indicators Scale (ACIS) identified a cluster of strong markets in the Pacific region above 30 other apartment markets. The data reinforce Landauer's judgment that there is money to be made in multi-family residential investment in 1992.

Potential purchasers of hotel properties should be aware that a robust turn-around in the hospitality industry is not on the horizon. The average occupancy level for 1991 is approximately 62 percent, down about 2 percent. 1992 should see negligible supply growth and only a modest increase in demand. It is perceived that over half of the country's hotels cannot meet debt service, laying the groundwork for a major industry recapitalization. Now, ironically, is an excellent time to purchase hotels for the long term. Performance has bottomed out and pricing is favorable. The leading hotel markets are Las Vegas and Honolulu, according to a five-year equilibrium forecast by Landauer.

The 1992 edition of the Landauer Real Estate Market Forecast marks a decade of publication evaluating the nation's property markets and their relationship to the wider economy.

Copies of Landauer's 1992 Real Estate Market Forecast may be ordered by qualified professionals from Mary H. Rasmussen, manager of Public Relations, Landauer Real Estate Counselors, 335 Madison Avenue, New York, New York 10017, [phone].