Forget about McMansions, large offices, bigger stores and outsized returns on investments. The new trends in real estate are all about smaller everything.

Less is going to become more, said Jonathan Miller, a PricewaterhouseCoopers consultant, summing up a theme that ran through the Urban Land Institute’s fall meeting last week in Washington, D.C.

Commercial real estate executives and other experts painted a picture of an industry turned upside down by the worst economic collapse since the Great Depression, with asset values resetting 30% to 50% off their 2007 peak.

Staggering personal and government debt, high unemployment, stagnant wages and lower consumption will likely make the recovery look like a reverse J, says ULI senior fellow Stephen Blank. That contrasts to the sharp V or even slower U-shaped comebacks after prior recessions.

Demand for real estate is especially impacted by employment. And demand will likely remain muted until the jobless rate, stuck at 9.6%, drops sharply — not seen happening soon.

Return Of Rentals

While the single-family home market remains weakened with excess supply and other problems, the apartment sector is seen coming back the strongest as refugees from the housing bust and young echo-boomers seek shelter in rentals.

Rental is clearly going to go straight up, said Geoffrey Stack, managing director of Sares-Regis Group, a diversified real estate company operating in the Western U.S.

But new development anywhere will be muted at best. In an era of less, you don’t need anything new, Blank said.

Some new multifamily apartment developments could arise this year, Miller says. But he adds that most developers won’t break ground on very much until 2011 or 2012.

Constance Moore, CEO of BRE Properties (BRE ), a REIT that focuses on multifamily housing, says her firm dismissed half of its development staff. We all got fat, she said.

The company plans to restart its development pipeline this year but in a measured way, she says.

Even if we could grow faster, we won’t, Moore said. We need job growth.

Moore says rents dropped dramatically across BRE’s geographic markets but studios and one bedrooms are starting to fill up as people tire of doubling up with roommates.

Stack says he doubts the need for larger apartments in the new environment. He says the tendency now is smaller units and more of them. He sees one-bedroom apartments shrinking from 800 to 1,000 square feet down to 650 to 700 square feet.