Real estate allocations are higher. Return expectations are lower. Capital flows will decline. Foreign investments will increase. Medical office and apartment properties are hot; retail is not. Those are just a few of the findings of Tax-Exempt Real Estate Investment 2008, the 12th annual plan sponsor survey conducted by Institutional Real Estate, Inc. (IREI) and San Francisco–based research and consulting firm Kingsley Associates.

After a high-flying half-decade, shares of publicly traded U.S. real estate investment trusts took quite the tumble during the past year. The sector’s decline generally pushed REIT share prices from an average premium of 20 percent over the net asset value of a trust’s property portfolio to a roughly 20 percent discount to NAV, calculates Keith Pauley, managing director with Chicago-based LaSalle Investment Management’s global real estate securities group.

Everything worked perfectly. We can all feel secure in knowing that, once again, economic cycles have proven to be resilient and the cause of such cycles — basic human nature and the constant tug-of-war between greed and fear — are still both intact and highly dependable. The laws of gravity are still valid. Wildly inflated asset values, oddly analogous to the inflated physiques of many modern-era sports heroes, are rapidly becoming a matter of congressional clean-up and fading memory. Even the most ardent optimist must now face up to the harsh realities of the market and accept that the past bull market, filled with and fueled by cheap and indiscriminate capital, is dead.