REBusinessOnline.com’s sister publication, Shopping Center Business magazine, recently teamed with Trammell Crow Company’s East Coast Retail Investment Team to co-host a roundtable of institutional retail investors, to see what the market is buying, what it wants to dispose of, and what the trends are for institutional owners.

This is an excerpt of the discussion. To read more from the roundtable, see the December issue of Shopping Center Business magazine or click here.

The roundtable was held in September at the Westin Times Square in New York. Attendees included David Craine, LaSalle Investment Management; Dean Bernstein, New Plan Excel Realty Trust; Steve Vittorio, Prudential Real Estate Investors; George Fryer, AEW Capital Management; Tom Caputo, Kimco Realty; Dan Weaver, RREEF; Adam Ifshin, DLC Management; Jim Thompson, Regency Centers; and John Hendrickson, Federal Realty Investment Trust. The roundtable was moderated by Lynn DeMarco and Randall Shearin.

Shearin: What is going to have the most impact over the next 12 months: interest rates, energy costs, war or security?

Caputo: Last year at this roundtable, Glenn Rufrano of New Plan Excel said he saw a bubble in the condominium market, and sure enough, he was right on the money. From our perspective, we are worried about the consumer on two fronts. One is the energy front and the other is the housing bubble, which has burst in some markets. There is a lack of demand for housing that is coupled with rising interest rates and the bonanza of refinancing is over. Wal-Mart popped up first saying that its customer was starting to hurt. The $30,000 annual income range was starting to hurt because of the cost of energy. A few months later, we started hearing from other retailers that their customers in the $60,000 to $70,000 range were starting to hurt, too.

Hendrickson: Our average household income at our centers is $96,000 within 3 miles. We just bought a property in Wellesley, Massachusetts, where the average household income is $190,000. That consumer is not worried about the price of gasoline. From our standpoint, energy is not a concern.

Vittorio: A month ago, I would have said interest rates. That seems to have subsided. Interest rates impact the economy and the consumer more than any of the other choices. Will interest rates rise in the next 12 months? Who knows?

Ifshin: Interest rates are pretty stable right now. Energy is also down a bit and it will go a lot further down. I am worried about a real recession. If growth slows, the deficit is going to balloon in a hurry. The current administration is spending more than it can ever take in. That is going to have an impact sooner or later on taxes. It has already had a major impact on property taxes. This hurts the consumer and it hurts us. It reduces real rental growth. I think the real risk here is that the Fed has overdone it. I don’t see a damaging 1991-style recession but the housing market is going to pull whatever growth is in the economy out of the economy by the first quarter of 2007. If growth slows, we are the business of renting to people who sell to consumers, and that can’t be good.

Weaver: Our research group thinks that when you look at the slowing housing market, and what could be a slowing economy, that we are going to see very benign retail growth. In some markets, where housing could really get hammered, they think that retail sales growth could slow significantly. Interest rates will have an impact because if they move up, and you relate that to the slow housing growth, things could get a lot worse. I hope the Fed will put the brakes on raising rates and potentially even back them down a little bit to soften the blow on the housing situation.

Craine: I will take the scariest situation. War and terrorism could have a tremendous impact on the volatility of the energy markets and how the world reacts interest rate-wise. I’m not saying it is the most likely to happen, but it would have the biggest impact.

Thompson: I think an act of war in this country would have a domino effect.

Ifshin: That’s why everyone is so enamored of office now. You have job growth in a market that lost 15 million square feet of space.