CHICAGO -- Real estate investors remain firmly entrenched on the sidelines these days, according to a new survey by CB Commercial Real Estate Group.
The survey group, drawn from a list of 100 top national real estate investment firms, reported they had acquired only 38 properties across the United States in the first half of 1991 compared to 210 deals during all of 1990.
"Real estate investment activity has fallen off dramatically in the last six to nine months," the survey said. "The most detrimental factor affecting investment is the current oversupply of various property types, coupled with increasing vacancies, decreasing rents and declining absorption."
A lack of capital that has created a credit crunch in real estate is also having a large effect on investors' reluctance to enter the market, the CB Commercial survey found.
"Until the devaluation in real estate values ends, we'll continue to see liquidity problems," said J. McDonald Williams, president of Trammell Crow Co. in Dallas. "And we have not seen the end of the devaluation."
Nationally, office vacancies remain around 20 percent and in some markets the supply of office space still exceeds 10 years' worth of absorption. Values for most office properties have fallen 30 percent or more in the last two years and some say they will decline even further.
"But what's happening in the office market is not real estate. Offices have nothing to do with what's happening in retail, warehouses or apartments," said Paul Sack, founder and principal of RREEF, a pension fund investment adviser and manager.
Mr. Sack, speaking to the American Society of Real Estate Counselors during the recent National Association of Realtors convention in Las Vegas, said warehouses and shopping centers have earned good returns in the past and should continue to do so.
"The best investment right now might be empty warehouses," Mr. Sack said. "It's a very different market than offices. Eighteen months after the recovery begins, they should fill up."
The CB survey found that there is a marked preference by investors for warehouse and distribution facilities, followed by other industrial buildings. Apartments and community retail centers followed on the preference list.
Los Angeles remained the top city for investment among this group. Then came San Francisco, Seattle, Washington and Chicago.
But Mr. Sack said he doesn't expect much pickup in real estate investment left slack by the defection from the market of banks and insurance companies.
"The '90s is going to be dominated by a shortage of capital for real estate," he said. "And I welcome it."