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Editor's note: This is the 10th installment in TheStreet.com's Home Front series, a collection of twice-weekly features examining how American business, society and investing have changed in the post-Sept. 11 landscape.

Before Sept. 11, concerns about the slowing economy's impact on real estate were beginning to weigh on the minds of real estate investors.

Now, such worries seem trivial since the destruction of the World Trade Center has changed the face of commercial real estate forever. Yet even today, nobody is certain of the future of the sector.

If the economy was on the brink prior to Sept. 11, the explosions in New York and Washington pushed it over. Yet decisions driven not by economics but by safety, strategy and convenience will also profoundly affect the commercial property markets.

For investors interested in real estate holdings, understanding the potential changes and their implications will be key to profiting from bricks and mortar in the coming months.

Lagging Behind

There is little doubt of the detrimental impact of the Sept. 11 attacks on the U.S. economy. "While the U.S. economy was already showing signs of weakening, the impact of the Sept. 11 attacks has clearly accelerated and intensified the slowdown of the national economy," Wachovia Securities director of real estate research Christopher Haley recently told clients.

And as the weak earnings of real estate companies in the third quarter showed, real estate investment trust, or REIT, fundamentals will probably get worse before they get better.

"While the economy started weakening earlier in 2001, we saw the more pronounced effects of real estate companies' reported earnings the third quarter as occupancy rates are decreasing and rents are moderating," Haley said. "We also believe it is fair to say that the impact of the slowdown since Sept. 11 is probably not fully reflected in the weaker earnings results seen thus far due to the lag. We would expect the next several quarters, perhaps more, to remain quite difficult with regards to weakening real estate fundamentals."

Indeed, real estate is typically a lagging indicator: Fundamental trends in real estate tend to follow the general economy rather than serve as a predictor of future economic activity. ...