The U.S. commercial real-estate cycle appears to have reached its peak and will begin pulling back in 2007, according to a new survey of industry executives, The Wall Street Journal reported Wednesday.

The Urban Land Institute, a Washington-based nonprofit planning and research group, and PricewaterhouseCoopers surveyed more than 600 developers, investors, brokers, consultants and lenders this summer for an annual report on the industry, dubbed Emerging Trends in Real Estate 2007.

The survey suggests commercial real estate is beginning a return to its norm as an income-producing investment rather than the wildly appreciating asset class it has been this decade.

The easy lending of the past several years will tighten next year in part because of worries about the economy, surveyed executives said.

Investors will have to turn to asset management and operating performance to raise return as investment inflows slow because of lower return expectations, they added.

Still, those surveyed expect commercial real-estate cash flow to continue to grow as factors such as reduced vacancies and higher rents keep improving across most property types. One reason: high construction costs are putting a damper on new construction.

While the commercial real-estate market has exhibited some signs of a bubble in recent years -- driven by low interest rates and an influx of investment -- it has differed from the residential market.

A key difference is that supply and demand have been more tied to vacancies and rents and not as closely linked to the rising interest rates that have cooled the housing market, according to the report.

Source: Xinhua