Emerging real estate trends: Buy infill, avoid suburbs

Buy apartments, hotels, land and distressed properties, but focus on infill while avoiding the fringes; hold onto office buildings until the market improves; look for deals in shopping malls, but only in upscale areas.

Oh, and go ahead and grab that Miami Beach ocean-view condo you've had your eye on.

That was the advice to real estate investors from experts in a webcast release WalletPop tapped into this week for the Emerging Trends in Real Estate 2010 Report, co-sponsored by the Urban Land Institute and PricewaterhouseCoopers LLP.

The top 10 strongest markets for real estate investment remained largely constant from previous reports, all strong business districts with close-in residential development and mass transportation, many of them adjacent to water. Many have suffered, of course, but they seem to be recovering faster than other areas.

1. Washington, D.C.
2. San Francisco
3. Boston
4. New York
5. Houston
6. Seattle
7. Denver
8. Dallas
9. Los Angeles
10. San Diego (identified as having "the nation's best climate")

"These regions attract high brainpower jobs," said Jonathan Miller, consultant with PricewaterhouseCoopers.

By contrast, values in the middle of the country and much of the sunbelt states continue to be severely anemic.

In terms of the types of real estate to consider, the report predicted that office building values will not recover until 2011 or 2012 but hotels may rebound quickly if the economy does. Retail continues to be "a Darwinian investment," Miller said. "It's survival of the fittest."

Perhaps the most difficult advice to follow was the one borne of necessity: pay cash, since debt markets remain severely constricted. Timing, too, will be tricky.

"A lot of the first deals are going to be dreck," Miller said. "You want to focus on quality....Less capitalized owners are going to be at greater risk and you're going to see a lot of properties going shabby."

Dream about the future -- especially urban infill and green, sustainable development, Miller advised, rather than focusing on the continuing recession and erratic recovery.

"On balance, a sober year for 2010 and maybe not much better in 2011," Miller said, concluding the webcast. "It depends greatly on when the consumers come back and we don't see much of a resurgence."