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Real-estatedevelopers and investors are expected to be alittle more cautious in 2007.

Among their reasons forconcern: whether the single-family housing market has bottomed out; and whether rents will continue to go up forapartments, offices and other income-generating properties. In one measure, property investors will be less likely to increase their stakes in U.S. bricks and mortar compared with last year. According to asurvey of 1,000 real-estateinvestors commissioned by brokerage firm Marcus & Millichap and trade publication National Real EstateInvestor, 60% of investors planned to increase their stakes in U.S. real estatethis year, down from 70% last year and 74% in 2005.

Of course, 60% increasing their investment is still amajority and a"vote of confidence," says Harvey Green, chief executive of Encino, Calif.-based Marcus & Millichap. But, he adds, "investors are sharpening their pencils and becoming more selective."

Office

One of the strongest performers last year, the office sector seems poised to realize equally impressive gains this year. Sales prices will stay high, rents will increase, and foreign investment will continue to arrive on U.S. shores. "There's nothing to suggest there's aslowdown coming in terms of demand foroffice space," says Keven Lindemann, director of the real-estategroup at SNL Financial, aresearch group based in Charlottesville, Va.

Formuch of last year, markets on the East and West Coasts that benefited from strong job growth and international trade dazzled investors with tight vacancy numbers and corresponding rental-rate increases. This group of showoffs included Manhattan, Washington, Orange County, Calif., and Miami.

This year, some laggard markets, such as Chicago and Boston, should excel. "Those markets turned around in 2006, but you will see them escalate up the scale in 2007," in some cases outperforming the showoffs in terms of rent growth, says Robert Bach, national director of market analysis forChicago-based brokerage firm Grubb & Ellis. Still, from market to market, there are wide disparities. Dallas's vacancy rate was more than 25% forthe third quarter while neighboring Fort Worth, Texas, had atight 4%, according to Moody's Investors Services. Fort Worth outperformed thanks in part to amajor natural- gas find in the area.

In some markets, buildings scheduled to open this year will mean competition that could rein in rents. In Washington, more than 16 million square feet of office space is under construction. The central-business districts of Orlando, Fla., and Wilmington, Del., are described by Moody's as having "staggering new construction."

Single-Family Homes

The end of 2006 brought positive signs that the worst of the housing slump may be over. After months of slowing sales, sales of new and existing homes rose slightly in November and inventories of homes forsale declined. But the road to arecovering market this year is likely to be uneven. Sales prices have declined four months in arow. "It's too early to tell whether sales have stabilized, but they may have," says Patrick Newport, an economist at Waltham, Ma.-based consulting firm Global Insight Inc. Mr. Newport expects home sales to decline modestly formuch of the year before picking up early next year.

Much will depend on whether mortgage rates remain low and the economy stays relatively strong. The new-home market is being helped by adecline in housing starts, down 25.5% in November from ayear earlier. If builders continue to curb new construction in the early part of this year, that should reduce the glut of homes forsale in many markets.

Apartments

After several years in the shadow of the booming for-sale market, apartments regained some luster among consumers and investors last year. With potential home buyers locked out because of inflated prices or a"wait-and-see" attitude before making the home-buying plunge, apartments have been the beneficiary, with vacancies dropping and rents up their fastest in several years.

This year, rents should continue to rise, but not as much. The failure of the condo-conversion craze in markets such as Florida and Southern California could increase supply, giving renters more leverage in rents they're willing to pay. And new apartment developments will also increase renters' choices. Reis Inc., aNew York-based research group, is expecting national rent growth of 3.6% this year, compared with 4.2% last year.

Retail

Strong consumer spending drove rent increases forretail real estateover the past several years. Now, investors in shopping malls and the strip centers will see aslowdown in rent growth as consumer spending ebbs.

Retail will suffer from a split in the overall economy, says Raymond Torto, principal and chief strategist of Boston-based real-estate research firm Torto Wheaton Research. The commercial sectors that service businesses -- office and industrial -- are coming on strong while those sectors that cater to consumers -- including retail -- and going to have a weaker 2007, he says. Part of that is the disappearance of home-equity growth, which freed up cash for consumers. Still, rents are expected to rise, which is good news for shopping-center owners.