The real estate mantra for the new millennium will be simple: Discipline, control and real returns. So says Emerging Trends in Real Estate 2000, one of the industry's most respected annual forecasts, executed by New York-based Lend Lease Real Estate Investments Inc. and New York-based PricewaterhouseCoopers LLP.

Lend Lease, which has more than $37 billion in its global real estate portfolio, and PricewaterhouseCoopers, whose real estate group services include developing real estate strategies and valuing real estate around the globe, have tapped the collective wisdom of some 150 investors, developers, analysts, academics, researchers and space users to predict the coming year in commercial real estate.

In this year's pool of findings, Emerging Trends (ET) says investors should focus on traditional income-producing real estate such as well-leased downtown office, apartments and industrial properties next year. The worst bets for 2000 will include power centers, which suffer from oversupply and inadequate demand; limited-service hotels, which don't hold "any allure unless you want to hear what's going on in an adjacent room"; and one-dimensional downtowns, because new stadiums or convention centers won't do the trick.

Speaking of multidimensional downtowns, ET reports that San Francisco will be hot for development in 2000, where St. Louis will be not so hot. New York, Boston and Los Angeles have good-to-excellent investment and development potential during the next 12 months, while development prospects in Detroit, Houston and Dallas will be less bright.

High-tech continues impact ET's industry observers say technology and demographic currents are drastically altering how people live and work. These changes will ultimately influence real estate investors in ways those in the industry can only begin to appreciate. For example:

* The technology and information revolution is moderating growth in the demand for and the use of office, industrial and retail properties;

* 24-hour cities and prime in-fill locations are gaining favor among developers;

* The public markets are restraining future supply-demand imbalances by controlling capital flow; and

* Although the economy looks solid, growth is slowing: U. S. markets have entered a mature phase and future growth won't be as dramatic. Unless a deep recession pulls the rug out from under tenant demand and consumer spending, 2000 will be a period of relative supply/demand balance in most property sectors and markets.

The biggest change in the real estate world in 2000 will continue to be technology - whether it is in office, retail, industrial or hotel. Technology is causing a convergence of life, work and home. Work is now mobile, and larger firms are going virtual, the report notes.

For industrial, just-in-time inventory (a signature e-commerce trend) has enabled companies to gain a 20% efficiency in the use of inventories. That means distributors have less need to warehouse goods. For developers, that means less space is needed.

Suburbs vs. resurgent CBDs Migration from suburbs to cities will increase in 2000 as residents face problems that were once associated with urban America but are now infecting the suburbs, such as congestion, crime and failing schools. Accordingly, 24-hour cities - those areas with nearby affluent neighborhoods as well as convenient shopping, schools, entertainment, parks and transportation alternatives - are poised to prosper in 2000 and beyond.

ET repeatedly mentions in-fill redevelopment and urban renewal as favored investments in the future. Timely, out-of-the-ground buildings in supply-constrained markets such as San Francisco, New York, Boston, Chicago and Washington, D. C., "can hardly miss," the ET analysts say, given pent-up demand generated by a decade without new construction.

Yet while the well-known 24-hour mega-cities are considered the best investment markets, suburban meccas such as Dallas, Atlanta, Houston and Phoenix continue to lag behind because of development risks and bad karma over sprawl-related issues.

According to ET, those in the real estate development field should:

* Concentrate on choice locations and focus on premium space;

* Recognize the suburbs have peaked; and

* Redevelop under-used properties in and around thriving urban and suburban 24-hour locations.

The capital-markets tether As evidenced by last year's rapidly changing capital outlook, the real estate industry has changed and will continue to evolve in 2000. The industry is now captive to market forces beyond its control, where development has become a commodity business. All of the capital markets are tethered together. The advent of commercial mortgage-backed securities (CMBS) has tied real estate markets to the fixed-income universe where any blips in any sector can be felt.

That said, ET predicts there will be ample, but restrained, capital flowing from all sources in 2000. Expectations are that CMBS conduits can conservatively maintain a $1 billion-per-week securitization pace, which calculates to a doubling of the CMBS market cap to $500 billion within five years.

Consolidation of real estate investment trusts (REITs) should continue. Emerging Trends predicts a major shakeup and reordering among REITs in 2000, including privatization of some companies and extensive M&A activity. REITs are also expected to sell weaker holdings - nonstrategic assets purchased during their growth drive.

In short, the dawn of the new millennium will bring a more unforgiving, if uncertain, real estate investment environment where the strong will survive and the weak will struggle. Despite technological advances and the unceasing march of e-commerce, bricks and mortar will stand the test.

But for real estate in 2000, it must be the right bricks and mortar.