While the economy has improved greatly since early 2009, Steve Frankel, an analyst with Green Street Advisors, cautions that investors should expect a “tepid recovery” for at least the balance of 2010. Frankel said increases in consumer confidence; business sentiment, trade, and output are reasons why the first part of this year showed signs of recovery. Unfortunately, Frankel believes that turmoil in the European markets and weaker-than-expected hiring rates have slowed that recovery considerably.

“We generally view the economy through a ‘new normal’ lens and believe that economic growth and consumption will be constrained over the medium-term as the U.S. works through a de-leveraging cycle and consumers pay down debt instead of spend,” Frankel said.

There is a current debate in the real estate world about the availability of debt capital: Some believe it is become more plentiful while others are expecting lenders to remain cautious. Frankel commented that both debt financing and the availability of capital has improved in the last two years, but that it is still much more difficult to get financing for secondary assets than it is for core real estate. But he says that even that is improving for some owners.

“The recent de-thawing of the CMBS market has helped owners of some secondary assets secure loans that would not have been available a few months ago,” Frankel said. “As the new CMBS gains increased market penetration, capital will flow more readily to secondary assets, although this process could take a while.”

When it comes to sustaining a real recovery, Frankel stressed that investors need to focus on more than just the job rate.

“Consumer spending is important to monitor and is a function of income growth and the savings rate,” Frankel said. “Since consumption produces the lion's share of GDP, if the savings rate increases and/or income growth remains under pressure, economic growth will be dampened.”