Addressing last week’s NAREIT convention, Green Street Advisors’ Mike Kirby gave a glowing appraisal of the mall sector. He wasn’t the only REIT analyst to give retail high marks at the show, where various denizens of the REIT galaxy converged inside the Boston Sheraton. If few panelists had anything bad to say about retail, however, fewer still were lining up to sing the accolades for another hot topic: unlisted REITs.

"I’ve never seen the malls doing better. Things really couldn’t be any better for this sector," said Kirby. With consumer spending still strong, the nation’s retail sector hasn’t deteriorated as badly as other sectors. But analysts are concerned that any sudden drop in consumer spending could seriously hurt the malls.

He was less euphoric in his take on the office sector, predicting that the next three years will bring "flat growth" to the market. That’s dismal news for the office market, considering high double-digit vacancies nationwide and a hundreds of million sq. ft. of shadow and sublease space.

In terms of anticipated performance, Kirby lumped the apartment market somewhere between office and retail, though a flood of new apartment supply in 2004 is, in his view, unhealthy. Still, he summed up the apartment market as boasting historical strengths: "This is generally a sector that has decent prospects," he said.

During a post-lunch session, Ernst & Young’s Dale Anne Reiss joined Susan Hudson Wilson of Property Portfolio Research and Roy March of real estate investment bank Eastdil Realty for a spirited discussion of the REIT market, particularly unlisted (also known as private) REITs.

At one moment during their talk, an audience member stood up and addressed the panel. "NAREIT needs to do something about these private REITs," said the man indignantly. The panelists mulled over the comment briefly before Reiss responded that "many of these companies haven’t done anything wrong."

"These private REITs are sold rather than bought. They are also bought by people with different investment horizons than you. You’re a sophisticated investor," said Reiss. March added that the sponsors of these unlisted REITs aren’t new to the real estate game. "They’ve been around for a while, many of them. Still, there’s a lot of criticism out there, maybe even a little jealousy. The fact is, people are buying this," said March.

Not only are they buying it, some established real estate firms are getting in on the action. As PPR’s Hudson-Wilson noted, Texas-based developer/owner Hines is now launching a private REIT. Hudson-Wilson suggested that small, retail investors are comfortable with a 7% yield. She also said that the wave of capital flooding private REITs should also be flowing into listed REITs. "It’s a sucking sound away from the listed REITs’ fundraising efforts," said Hudson-Wilson.

March added that investor dollars flowing into Wells and the like represent "money that is going away for 10 to 12 years" due to their illiquid nature. But he admitted that this potential downside hasn’t dulled investor demand for the Wells product. It’s true: even NASD sanctions against the Wells REIT’s sponsor for offering brokers non-cash gifts to market their REIT and the waves of bad publicity to follow have done little to trim investor demand.

Near the end of the session, Hudson-Wilson posed a question: "Wouldn’t you want to buy office vacancy with this wave of coming absorption?" For her part, she sees a strong office recovery on tap over the next few years. Why?

"You have 2.2 million people who want to get back into cubicles. I’m very positive about the office market recovery," she said. Dale Anne Reiss countered that " a magnitude of jobs" will be sent offshore in the next few years, which hardly bodes well for the office market.

Reiss did point out that this offshoring phenomenon will give industrial a boost. "There will be greater demand for warehouse space for goods coming in from China."