Get ready for a top-markets replay, dubious as it may be.

That's right, the Emerging Trends in Real Estate report is out again. And it's almost a carbon copy of last year's tome, declaring San Francisco the top major U.S. market for commercial real estate investment and development. Coming in at the No. 2 through No. 5 spots were perennial favorites New York City, Boston, Los Angeles and, unbelievably, Washington, D.C.

“These cities all have what investors crave: multidimensional business and residential environments, supply constraints, lifestyle attractions and mass transportation,” the report noted. “They're places where people want to live and work and where new development is difficult.”

Now, I guess I'm just a country girl at heart. But what on earth are the writers of this report – Lend Lease Real Estate Investments and Pricewaterhouse Coopers – talking about?

I suppose I see workers' attraction to beautiful San Francisco, but who can afford it? And does anybody really want to live in traffic-congested Los Angeles? Plus, I've lived in Washington, D.C. Yes, it was fun for a college student. But even as a professional, I could not possibly afford a decent place to live. And there are parts of that city that just scare me.

Here's a hint. The report is just that – a report. It is not based on numbers, which just happen to be the bread and butter of the real estate industry. Instead, it is based on “in-depth interviews of more than 150 leading real estate authorities.” In other words, it's a survey. And anyone who has been following Gallup's joke of a presidential poll knows just how reliable surveys can be.

“Survey respondents continue to favor investment in 24-hour cities -- cities that have succeeded in bringing together a critical mass of quality housing and business activity in central locations,” a statement from Lend Lease said.

The report further notes that in some major metropolitan areas, suburban “subcities” are evolving. These subcities are taking on many of the critical characteristics of 24-hour cities with attractive neighborhoods, office centers, excellent shopping, parks and entertainment amenities and, in some cases, alternatives to car transportation. Such submarkets include Atlanta's Buckhead district; Bethesda, Md.; Reston, Va.; Bellevue, Wash.; Walnut Creek, Calif.; and Birmingham, Mich.

But are things going to start on a downward spiral for alleged market leaders San Francisco and New York? The report notes that the San Francisco market -- which also includes San Jose and the Silicon Valley -- is expected to continue to thrive even though economic pressures are forcing businesses operations to the suburbs and to lower-priced markets, and the outlook for tech industry tenants is uneven. Oh, OK. So they're telling us that the market is too expensive, but people will pay the high prices anyway. Yeah, right.

About New York, Emerging Trends reports, “Everyone wants to be here ... the market has never been stronger.” But confidence in further value gains has weakened. As with San Francisco, formerly fringe areas of the city and the suburbs are reaping the benefits of an extremely strong and diverse economy and low vacancy rates. It's worth noting that the number of jobs generated in New York has remained virtually stagnant when compared to other metro areas around the country. But, of course, the survey didn't take that into account.

The complete (and unscientific) rankings of major U.S. cities is as follows: 1. San Francisco; 2. New York; 3. Boston; 4. Los Angeles; 5. Washington, D.C.; 6. Seattle; 7. San Diego; 8. Chicago; 9. Denver; 10. Miami; 11. Minneapolis; 12. Atlanta; 13. Phoenix; 14. Philadelphia; 15. Dallas; 16. Detroit; 17. Houston; 18. St. Louis.

Among second-tier cities, the clear favorites among industry experts are Austin and Portland, Ore., while Tampa, Salt Lake City and Charlotte claim the next three positions. But the survey indicates that investor interest in secondary and tertiary cities is thin, and that these markets generally have suspect prospects. And be sure to tell that to all of the semiconductor and other technology firms flocking to Austin.

In other news, First Industrial Realty Trust, Inc. (NYSE: FR) announced solid third-quarter performance. The company's funds from operations (FFO) for the quarter were $43.1 million (93 cents per share/unit on a fully diluted basis), $38.5 million (85 cents) for the third quarter of 1999. The per-share increase was an impressive 9.4 percent.

Published: October 27, 2000

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Lesley Hensell covers commercial real estate and financial issues for Realty Times. Based outside of Dallas, Lesley works with high-tech and real estate clients as an independent marketing and public relations consultant. She also writes for several publications, including the Dallas Morning News. E-mail Lesley at: lhensell@earthlink.net