Deloitte Reports Commercial Real Estate Still Attractive Despite Credit Chaos

Deloitte expects commercial real estate to remain enticing as an
investment alternative in 2008, while the residential market heads
toward further decline
NEW YORK--(Business Wire)--While the credit crunch and economic uncertainty have caused
investor anxiety and tighter lending standards, commercial real estate
remains comparatively attractive with solid underlying fundamentals,
plentiful capital, and steady allocations, according to Deloitte LLP's
Real Estate Capital Markets Top Ten Issues - 2008 Report, released
today.

"In prior boom cycles, commercial real estate has responded by
overbuilding. The industry has clearly learned its lesson because this
time commercial real estate is enduring a credit crunch - not a crisis
- partially because it resisted this urge. No doubt, the industry is
in a strong position to withstand a recession, should one occur, and
commercial real estate remains a viable investment option for those
seeking to diversify and insulate their portfolios from market
volatility," said Dennis Yeskey of Deloitte's real estate capital
markets practice. "Capital flow will return in 2008, with the
exception of highly leveraged deals, and new opportunities are being
sought in distressed debt funds, niche opportunities, and global
markets."

"Institutional investors remain interested in commercial real
estate; allocations haven't been curtailed. In fact, the U.S. market
has become increasingly more attractive to foreign investors," said
Dorothy Alpert, national leader for Deloitte's real estate practice.
"U.S. commercial real estate had become expensive but, due to the weak
U.S. dollar, it's relatively attractive compared to other
international markets."

The report provides insight about commercial real estate market
trends, over the short and long term, through a review of critical
issues, an examination of the industry's core fundamentals, and an
analysis of underlying factors. Findings from the report include:

-- Continuing a decade of positive growth, public and private
commercial real estate returns, excluding public REITs,
outperformed the volatile equity market in 2007 - but returns
in the high teens for 2008 may be unrealistic due to
tightening credit and economic uneasiness.

-- Despite stable commercial real estate product fundamentals,
the credit crunch has spilled into the CMBS and CDO markets
affecting the global debt and equity markets, which - when
coupled with investor losses, related bankruptcies, the U.S.
economic slowdown, and rating agency concern - resulted in an
increase in debt capital costs and an overall re-pricing of
commercial real estate debt.

-- After 24 consecutive quarters of growth, the U.S. economy is
showing signs of fatigue: the housing market contracted at an
11.8 percent annual rate as of Q2 2007 and stock market
volatility shook confidence.

-- While residential real estate and commercial real estate are
fundamentally different and heading in opposite directions,
lenders are now bringing much needed scrutiny to commercial
underwriting.

-- Fundamentals for office and industrial remain strong, and
mixed for multi-family, while retail faces a potential
downturn due to the credit crunch's affect on housing and
consumer spending. Overall vacancies remain stable and rent
continues to increase, but with cap rates beginning to
increase as spreads narrow, a rent vs. caps inversion may
occur in the future.

This is Deloitte's tenth Real Estate Capital Markets Top Ten
Issues Report. A copy of the report is available on Deloitte's website
at www.deloitte.com/us/realestate. In addition, the report's authors
are available for interview.

About Deloitte's Real Estate Group

Deloitte's Real Estate group is one of the organization's
fastest-growing industry groups. The group provides a full range of
professional services specifically designed for owners, service
companies, investment advisors, developers, property management and
leasing companies, REITs, mortgage brokers and bankers, pension funds,
private equity funds, syndicators and insurance companies. The global
industry group has offices across the United States, Europe, and Asia.

The Real Estate group is part of Deloitte's in-depth,
industry-focused approach to client service. Through our industry
groups we are committed to bringing leading sector insights, ideas and
world-class services to the organizations we serve. Visit us online at
www.deloitte.com/us/industries to learn more about Deloitte's industry
groups and to access our complimentary Dbriefs webcast series,
Deloitte Insights podcast program and innovative industry research.

About Deloitte

As used in this document, "Deloitte" means Deloitte Consulting
LLP, a subsidiary of Deloitte & Touche USA LLP. Please see
www.deloitte.com/about for a detailed description of the legal
structure of Deloitte & Touche USA LLP and its subsidiaries.

Deloitte National Public Relations
Elizabeth Fogerty, +1-212-436-7179
efogerty@deloitte.com
or
Hill & Knowlton
Jessica Anderson, +1-212-885-0492
jessica.anderson@hillandknowlton.com

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