Washington, DC, Oct. 10—A panel of real estate finance and economic experts appearing on Capitol Hill on October 4 identified the deepening U.S. economic slowdown and emerging property and casualty insurance issues as key threats to the nation's $20 trillion real estate sector in the aftermath of the September 11 terrorist attacks.

"Real estate is very much on the front lines of the crisis affecting New York and rippling throughout the broader U.S. economy," said Owen D. Thomas, a managing director at Morgan Stanley and member of The Real Estate Roundtable. Thomas spoke at a briefing hosted by the Congressional Real Estate Caucus that drew about 100 real estate professionals, association leaders and members of Congress. "The worsening macroeconomic and business environment, exacerbated by the events of September 11, will have a material impact on overall real estate markets," he added.

Thomas, who spoke on behalf of The Real Estate Roundtable, expressed particular concern about the effects of the economic slowdown on the lodging industry, where an estimated 500,000 employees may be laid off in the next three months and financing for new projects has all but dried up.

Another serious concern is property owners' ability to obtain adequate insurance coverage in the wake of the terrorist attacks. Before September 11, property and casualty and general liability insurance policies typically covered damages resulting from acts of terrorism, excluding only damages relating to acts of war. Future policies are now expected to exclude both types of losses—a change that would severely impair property owners' ability to conduct routine real estate transactions.

"Without adequate insurance, it would be difficult—if not impossible—for real estate owners to operate or acquire properties or refinance loans," said Real Estate Roundtable president and COO Jeffrey D. DeBoer. "We urge policymakers to recognize this as a major threat to the economy and to address this issue expeditiously." The Roundtable and other real estate groups encourage U.S. policymakers to study the United Kingdom's Pool Re system as a possible model for insuring against acts of terrorism.

The briefing also featured top economists from the National Association of Home Builders, National Association of Realtors and the Mortgage Bankers Association of America—David F. Seiders, David Lereah and Douglas G. Duncan, respectively. The housing sector, which until the tragedies had been helping to sustain the ailing economy, was now headed for a downturn itself in the third and fourth quarters, they said. "Housing has now ceased to be one of the props of the economy," Seiders said. "We're participating in the slowdown."

U.S. Rep. Phil English (R-PA), who moderated the session, said, "The real estate industry depends on a robust, growing economy, which as we all know has slowed considerably. We have arrived at a pivotal economic moment. The tragic events of September 11 are reverberating not only through our hearts as we as a nation work to return to our lives, but through the economy as more and more often the word 'recession' is being tossed about when talking about the economic slowdown. This was a valuable opportunity to bring those in the real estate business together with policymakers and have an open and sometimes frank discussion on where our nation's economy is heading." English co-chairs the 93-member Congressional Real Estate Caucus with U.S. Rep. Richard E. Neal (D-MA).

"This was a constructive dialogue about what real estate was like before September 11 and what it's like today—and more broadly about the role real estate plays in the American economy," Neal said. "Clearly what's happened in New York has altered all of that." He added that the aggregate value of the nation's real estate stock is about $20 trillion and that the industry generates over $290 billion annually in federal, state and local taxes. There are approximately 11 billion square feet of office space in America, providing space for 28 million workers.

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