Prof: War Could Hurt CRE

If a war with Iraq turns into a protracted conflict, consumer confidence and stock prices could fall, tipping the U.S. economy into recession and causing commercial property markets to decline further, according to a University of Southern California professor.Stuart Gabriel, director of USC's Lusk Center for Real Estate, noted that a similar chain of events was set in motion at the start of the Gulf War. "Further weakening in economic activity would exacerbate the slump in the nation's commercial property markets," he said. In this scenario, demand for office space would fall further and rents could soften; consumer confidence would fall, hurting retail sales and demand for retail space; businesses would spend less on plant and equipment, causing a decline in demand for industrial space; and the hotel market could relapse. In an alternate scenario, gross domestic product could grow 3.5%, Mr. Gabriel said. "The war would have to be avoided or quickly ended, consumer spending would have to be moderately strong, business confidence pick up, hiring recover, and business capital spending pick up," he said. "Stock prices would also have to improve."