The latest Emerging Trends in Real Estate forecast by the Urban Land Institute and PricewaterhouseCoopers has named Boston as one of the nation’s commercial real estate markets to watch next year.

More than 600 of the nation’s top real estate experts expect the sizzling commercial real estate market to cool next year, according to a study by the Urban Land Institute and PricewaterhouseCoopers.

“We’re headed for a healthy correction and that’s a good thing,” said Susan M. Smith, senior manager at PricewaterhouseCoopers. “This will allow for a more balanced market between buyers and sellers.”

The annual Emerging Trends in Real Estate forecast found that investors and developers believe uncertainty will characterize 2008. They expect capitalization, or “cap rates,” to rise and risk to be repriced. The cap rate is the ratio between the cash flow produced by a property and the price paid to buy it for its market value.

Smith said researchers found that because money was so readily available, investors went on a buying spree but failed to price risk correctly. As a result, investors were willing to take lower return while prices soared. But that is expected to change next year.

More than three-quarters of investors interviewed anticipate more stringent underwriting standards in 2008. Despite that apprehension, those investors expect most real estate investments to outperform the U.S. stock and bond returns in 2008 and are counting on ample capital sources to cushion the property markets.

Respondents believe the correction in the commercial market will not be as severe as in single-family and condominium sales. Commercial real estate supply and demand is relatively strong, development is in check and the fundamentals are still healthy, the study found.

So far this year, the Bay State’s data is mixed. From January through September, 2,878 commercial properties have sold, down from 3,073 for the same period a year ago – a 6.3 percent drop, according to The Warren Group, parent company of Banker & Tradesman. While sales volume has fallen, the overall dollar value has increased by 41 percent so far this year to $10.3 billion, up from $7.3 billion for the first nine months of 2006.

“It’s an odd combination,” said Catherine Daume, managing director at Jones Lang LaSalle, a global real estate firm with offices in Boston. “Transaction volume for the last three months slowed dramatically because of the credit crunch, but in the first half of the year, prices were on fire.”

‘Hot and Cold’

The study ranked Boston as sixth on the list of top commercial real estate markets in the United States to watch in 2008, and seventh in terms of risk.

After peaking in the late 1990s, Boston’s commercial real estate market was in freefall from 2000 to 2003 before leveling out. Today, a resurgent office market is enjoying rent spikes as money managers, insurers and professional services firms take new space, and high-tech/biotech companies expand.

With few buildings under construction or planned in Boston, demand and prices have increased, causing some tenants to conclude that it is time to make deals before prices rise even higher, the survey said.

Boston’s abundance of colleges and universities supplies its highly skilled talent, one of the prerequisites of a 24-hour global pathway city. Its cosmopolitan downtown provides attractions and sufficient excitement to be a 24-hour city.

Still, Boston has had “hot and cold” spots, the survey noted. Once a major banking center, Boston no longer has any commercial bank headquarters. Additionally, Cincinnati’s Procter & Gamble acquired The Gillette Co., and Fidelity Investments continues to move more back-office functions to lower-cost states, the study said.

After seeing home prices rise dramatically in recent years, Boston’s housing values have slipped and further decline is anticipated, the survey found. Low affordability, however, is expected to spur renter demand and Boston apartments rate a “strong buy” signal even as new multifamily dwellings become available.

The report ranks New York City as “the hottest commercial real estate market in the country” and the “ultimate American 24-hour city.” Vacancies in New York are in the mid-single digits, rents have skyrocketed and pricing is at all-time highs, the report noted. And while the market may have peaked, the weak dollar makes the city’s “monster” prices look inexpensive to foreign investors who are pouring money into Manhattan real estate, the survey said.

Not only is the New York market hot, but the commercial real estate industry also has acquired a “New York state of mind” as Wall Street and real estate have converged, according to surveyed real estate experts. In part because of its size, New York now sets the tone for the entire U.S. commercial real estate market and influences investor psychology as the bellwether for the nation. According to the report, local buyers and lenders once characterized real estate. Today, it is dominated by national financial institutions and landlords, many of whom are based in New York.

The report demonstrates a clearly bicoastal focus. Other top markets it identifies include Boston and Washington, D.C., which join New York as the East Coast’s most watched markets. On the West Coast, Seattle, San Francisco, Los Angeles and San Diego top the list. Denver is the lone non-coastal metropolitan area listed among the top markets to watch.

Housing reversals threaten to torpedo consumer confidence and upend the entire economy, the study noted. Adjustable-rate mortgage and increasing foreclosures dampen housing market outlooks through 2008, possibly into 2009, the study said. Any recovery will be slow.

Richard Rosan, president of Urban Land Institute Worldwide, said the report points to the value of sustainable or “green” building, which results in development that remains in demand despite market cycles.

“We are seeing an increasing emphasis on building efficiently to accommodate growth of pedestrian-friendly, mixed-use development; communities that provide housing near jobs; and development connected to transit,” Rosan said in a prepared statement. “What is selling now and will continue to sell are projects that cater to strong consumer desire for convenience. Those are the best bets.”