There are markets that will continue to do well even with a downturn. New York City is a hotbed for European Retailers and money. As long as exchange rates remain favorable and consumers are still shopping, New York will see many international retailers penetrate the market.

I do think there are real concerns on the commercial side and 2008 will be slow. But there are also many, many reasons to believe the pain won’t look anything like what’s happened on the residential side.

CMBS loans, while they may have some issues and did get too aggressive, don’t have the same issues as residential loans. There’s no such thing, for example, as a no-doc or low-doc commercial real estate mortgage that I’m aware of. Further, the pools of loans are scrutinized to a much greater degree because the average loan sizes or so much larger and there are fewer loans put into CMBS pools than RMBS pools.

With retail real estate specifically, retailers are definitely slowing expansion plans and some are closing stores, but it isn’t a flood tide yet. The retail real estate industry could absorb some vacancies without it being a disaster. Developers, at least anecdotally, do seem to be scaling back projects, slowing down the pace of development and even pulling the plug on some–so that eases concerns about overbuilding I think.

Overall, I also don’t think most observers realize that retail sales and retail rents don’t have a direct correlation. Most retailers pay fixed rents, only kicking a percentage of sales if they have really, really good years. Further, most retailers are signing long-term leases–5 years or more. While it’s certainly not great to have dark stores, the rent, in some cases, will still be coming in.

Overall, I don’t expect 2008 to be an easy year for the sector, but short of catastrophic numbers of bankruptcies and store closures, it’s not going to be a disaster.