The Capital and Spatial Divide: On a Path Toward Convergence

摘要

In a number of respects, the prognostication for the overall economy has improved over last quarter. The war in Iraq appears to be behind us, the tax relief act has passed, consumer confidence has ticked back up, and the stock market continues to flirt with a recovery. In the absence of external shocks, the economy appears to be headed in the right direction. There is still significant downside risk, however, and a number of false starts can be expected. There currently are few tangible signs of improvement. It is likely that there will be no major improvement until some time in 2004, suggesting a moderate near-term outlook for economic conditions. In the real estate capital markets, there will be ample supplies of debt and equity capital, leading to a very competitive environment and keeping downward pressure on yields. While real estate fundamentals are expected to slip a bit further, there are no signs of a precipitous drop. Thus, although there will be a lag between the eventual economic recovery and a rebound in the real estate market, the market should remain active and fluid, setting the stage for an eventual recovery.