Study: nyc still the tops for investors despite sept. 11.

Real estate investment prospects for all major metropolitan areas will decline next year, according to Emerging Trends in Real Estate(r) 2002. Although the "24-hour markets" have "peaked" New York, Washington D.C., Boston, Southern California and San Francisco will provide the best opportunity for investors in 2002.

Despite the World Trade Center attack, New York ranks as the country's number one market because of supply constraints.

Perennial survey leader San Francisco dropped to sixth place in the 2002 survey as a result of the "dot corn bomb" and the ensuing rent declines and vacancy rate increases.

Emerging Trends calls particular attention to Southern California -- from Los Angeles south to San Diego -- and boldly states that this "powerhouse" deserves recognition as a "galvanized market" capable of "feeding off its diversity, climate and ideal Pacific Rim location."

The report sounded a decidedly cautious note for other markets: Seattle, Miami, Denver, Philadelphia and Minneapolis are predicted to soften in the wake of the recession. "Hot" growth cities -- Houston, Dallas, Atlanta and Phoenix -- continue; to rank as least favored in the annual forecast.

Although the "24-hour" markets retain their "iron grips" as the favored commercial real estate locations, Emerging Trends identifies five issues that will diminish outlooks for 24-hour cities in 2002 and beyond:

1. Souring economy: The economic downturn is sure to test local governments as cutbacks force tax hikes and cuts in key city services. In-migration could drop off if crime increases and job opportunities diminish.

2. Federal indifference: Big-city mayors can expect little support from the new administration. Congress has not adopted an urban agenda either. Exception: New York will have a claim on funds to rebuild downtown.

3. Public school decline: A failure to improve public school systems will force a growing number of Echo Boomers back to the suburbs as they begin raising families in larger numbers.

4. Housing shortages: Cities continue to be plagued with affordable housing shortages. Resuscitating and replacing dilapidated housing stock must become a priority if city neighborhoods are to thrive and support business.

5. Fear factor: The recent terrorist attacks have cast a shadow on big city life and suburbs are perceived as much safer gain.

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 Sept. 11 terrorist attacks.

The top ten rankings of major U.S. cities for investment in 2002 are:

1. New York -- "Most supply constrained of all markets."

2. Washington, D.C. -- "Always a safe haven when the economy sags."

3. Boston -- "Financial district doesn't have room to grow... not enough construction to throw office market out of balance."

4. Southern California -- "Development activity never got hot enough to cause overbuilding."

5. Chicago -- "Downtown has held up 'surprisingly well' despite concerns about new office projects... but overall rents are softening."

6. San Francisco -- "Sanity returns to this overheated market, but at a price... abrupt rent declines and the flood of sublease space."

7. Seattle -- "Despite recent hard knocks, this market has strong legs for longer-term growth... Investors like the geographic barriers."

8. Miami -- "Continues its transformation from a retirement community into a Latin business center."

9. Denver -- "Underlying growth control sentiment and Rocky Mountain environmentalism help investors rationalize that this agglomeration is somehow less wide open."

10. Philadelphia -- "Local economy is relatively well diversified and markets are somewhat supply constrained."

Now in its 23rd year, Emerging Trends in Real Estate(r) is published by PricewaterhouseCoopers and Lend Lease Real Estate Investments. Both companies provide research and executive insights into the Emerging Trends report.

Copies of Emerging Trends in Real Estate(r) 2002 are available for $95 by emailing emerging [e-mail] or [e-mail]. Alternatively you may call Susan Tromp, 631-2345143 or Bonnie White, 212-554-4168.