Survey Finds Concern about Real Estate Prices.

An investor survey conducted by PricewaterhouseCoopers found that while investors continue to pursue well-leased properties in strong markets, they are concerned that industry fundamentals seem to be weakening.

Peter Korpacz, director of the company's global strategic real estate research practice, said even optimistic investors "worry that the longer the downturn persists, the greater the likelihood of widespread income losses. Rental rates will fall, vacancy rates will rise, and overall cap rates will fail to offset the resulting drop in income that will occur."

But in the meantime, commercial real estate remains hot. The survey found that institutional investors, foreign investors, and real estate investment trusts continued to buy property in the fourth quarter of 2002, with prices rising sharply as a result of the competition.

And favorable financing terms are one reason demand remains strong. Attractive financing has allowed small, private investors to compete head-to-head against major institutions and REITs, the survey said.

Particularly, regional malls and well-leased office buildings in key markets were caught in bidding wars, the survey found.

The PricewaterhouseCoopers survey found that apartments continue to prevail as the most sought after property type. Readily available and inexpensive debt has enabled many borrowers to remain assertive as buyers.

Most of the recent acquisitions by REITs have been in the retail sector. By comparison, both institutional and foreign investors have been active buyers of office properties.