Senior real estate believe that dysfunctional U.S. financial markets and the broad economic downturn have paralyzed the income-producing real estate sector - encompassing office buildings, shopping malls, warehouses, hotels, and apartment buildings - according to The Real Estate Roundtable Sentiment Survey for 4th quarter 2008.

"Real estate is now experiencing a seismic liquidity shock. Even though loan delinquencies in the sector are very low, the ongoing lack of credit and drop in asset values has paralyzed the market," said Roundtable President and CEO Jeffrey D. DeBoer. "It is now clear that unless bold policy actions are taken to specifically assist commercial real estate markets, this problem will intensify to mammoth proportions."

The 4Q 2008 Sentiment Survey shows senior executives' confidence in the real estate market has deteriorated below last quarter's depressed levels. Ninety percent of respondents believe conditions are worse, and over half stated that conditions are "much worse" than 12 months ago (up from 74% and 28%, respectively, in July). Of all respondents, 39 percent expect real estate market conditions to get worse in 2009, up from 24 percent in the previous quarter.

Respondents also reported that asset prices are continuing to drop, a trend they expect to persist over the coming year. Sixty-eight percent of those surveyed said commercial real estate values will be lower next year, while 27 percent believe they will be "much lower" (up from 49 percent and 5 percent, respectively, from the 3rd quarter).

Nearly all the executives surveyed said access to capital has significantly decreased as debt & equity markets have tightened. Notably, 84 percent said credit availability is "much worse" than it was one year ago. Equity financing conditions are worse as well, but not to the extent seen on the debt side - 51 percent characterized equity financing as "somewhat worse" than one year ago; only 23 percent said conditions are "much worse." Although there is mild optimism that capital market conditions will improve in 2009, approximately a quarter of those surveyed expect conditions to worsen.

In a letter to President-Elect Obama Nov. 7, DeBoer and Real Estate Roundtable Chairman Christopher Nassetta (Hilton Hotels Corp.) offered congratulations while requesting an opportunity to begin working with Mr. Obama's transition advisors on potential policy solutions for stabilizing the nation's multi-trillion-dollar real estate.

"Our immediate and overriding concern lies with the fact that credit and capital markets are essentially closed for business, particularly for commercial real estate," the letter stated. As a starting point for transforming the nation's outdated financial infrastructure and "advancing a new paradigm for the credit and capital markets of the 21 century."