WASHINGTON, D.C. & CHICAGO - Washington, D.C.-based Urban Land Institute (ULI) and Chicago-based LaSalle Investment Management have published market rep orts with different forecasts for the remainder of 1999 and 2000. In its report, ULI predicts a healthy real estate market, while LaSalle expects a decline in net real estate capital flow.

Despite predicting a healthy market for the remainder of 1999 in its ULI 1999 Real Estate Forecast, the Institute cautions that 2000 will not be as robust as 1997 and 1998. The ULI report calls the current real estate cycle "mature," and concludes that, "The growth in rents and values will slow measurably as economic growth slows and construction completions reach peak levels tempering the supply-demand balance that has favored real estate owners and developers in the past seven years." ULI expects real estate capital markets to be in balance through mid-2000.

The REIT sector, the report continues, "will remain capital constrained and REIT stock prices will not move up substantially until early or mid-2000." While the major metro markets ULI surveyed are expected to see further growth in rents and property values through mid-2000, growth rates overall will be down substantially. The favored investment markets through mid-2000, according to the report, will be Los Angeles, San Francisco, Boston, New York, and Phoenix. The report also predicts real estate performance by property type. Some highlights include:

* Office: The office sector will experience slowing demand, vibrant construction, a modest rise in vacancy rates and moderate increases in rents.

* Industrial: The industrial sector will be one of the better performers through mid-2000, but slowing demand combined with strong levels of construction during the past several years could change that momentum. Vacancy rates will rise moderately, while rent increases will be moderate.

* Retail: ULI views the retail sector as the "most out of favor sector" of all income-producing properties. However, in the coming year, retail rent growth should decline less for the retail sector than all other sectors. Retail should attract more interest from investors through mid-2000 than it has in recent years.

* Hotel: Occupancy levels fell in 1998 - a trend ULI expects to continue through mid-2000 due to high levels of construction. However, room rates and property values are expected to rise moderately.

* Multifamily: This sector will be favored through mid-2000, with rents rising and vacancies holding steady. Demand should remain strong, and construction completions should begin a decline in 2000 and 2001.

In a different report, LaSalle Investment Management predicts a 23% decline in real estate net capital flow for 1999 in its second-quarterly Market Watch. LaSalle says slowing will be most evident in the public markets, while the private market capital flows are expected hold steady for the remainder of 1999.

In the CMBS market, LaSalle analysts predict a decline in gross volume from $78 billion in 1998 to $70 billion in 1999. Market Watch also estimates that capital flow to REITs will total $17 billion in 1999, assuming prices recover in the last half of the year. Meanwhile, private real estate equity "continues to have strong positive capital inflows due to above average returns and high yields relative to U.S. Treasuries." Analysts also note that private investors who planned to sit out the remainder of the cycle because of high prices and low yields are now back in the market.

LaSalle's report also covers the office and hotel sectors, and made the following predictions:

* Office: The tightened credit markets of 1998 paired with a construction slowdown should keep office vacancy rates at "reasonable" levels in coming years. While analysts expect some office markets to weaken in 1999, "Job growth over the past year will lead to healthy office absorption." Researchers say delivery of new supply should peak in late 2000 and 2001, and they will closely monitor such markets as Dallas, Houston, Miami, Minneapolis, Phoenix, and San Jose, Calif., for signs of accelerating supply.

* Hotel: The LaSalle report predicts a full rebound from 1998, which saw hotels become the worst-performing REIT type. Public hotel firms are expected to fare better this year. Analysts note that hotels are among the best performing public real estate companies this year, and they credit the turnaround to several factors: the U.S. economy's continued and healthy growth; a GDP growth that should produce a room-demand increase; and a slowdown in new supply.

To obtain a copy of ULI's report, call Peggy Meehan at (202) 624-7086; for a copy of LaSalle's report, call Kim Palmbush at (312) 228-2784.