It seems that all we hear from the Chairman of the Fed to the talking heads on the tube is that commercial real estate is in horrible shape and has much further to fall. Well, someone apparently disagrees. A research piece from Goldman yesterday morning upgraded the REIT space to Neutral from Cautious.

We are revising our Industry view to Neutral (from Cautious) as we now see a roughly flat total return for REITs as the economic recovery takes shape. As such, we are moderating our negative view on the REIT sector. Our change in sector view is based on several factors: 1) fundamentals should bottom within the next 12-18 months which is consistent with prior downturns; 2) debt funding costs have been better than we anticipated and should keep cap rates at the low-end of our 7-10% forecast range; 3) we expect better positioned REITs to seek out acquisition opportunities as sellers accept market pricing and the pace of transactions increases over the next 12-24 months; and 4) the GS Economics Team expects low interest rates to remain in place for all of 2010 and 2011, a positive for CRE.