New York, NY, January 3, 2007--According to the 2007 Global Real Estate Forecast from real estate company Grubb & Ellis Co, a healthy economy will fuel growth in the U.S. office market in 2007, although the outlook for commercial real estate markets exposed to the weak housing market isn't as bright.
This year, according to the forecast, businesses will add staff and lease more space, helped by an economy that will strike a balance between recession and inflationary expansion.
About 300,000 of the year's expected new jobs will be located in office buildings, the report said.
Rental rates for the most prestigious buildings should rise by 5 percent or more in 20 central business districts including those in Washington, D.C. and Los Angeles--expected to be the two top U.S. office markets through 2011, the report predicted.
"The future of the office market looks bright," said Grubb & Ellis vice president Robert Bach in a statement. "Business capital spending and the expanding global economy will power demand for space even if the U.S. economy remains sluggish in the first half of 2007 as expected."
In the industrial market, however, demand for space is expected to fall 17.6 percent from a year ago to 140 million square feet. If the weak housing market constrained consumer spending and puts pressure on retailers, demand for retail distribution centers could drop, possibly handicapping the industrial market further, the report said.
Construction companies shrinking in response to the housing downturn could also result in a decreased demand for industrial space.
Yet demand for industrial space remains high in popular markets such as Los Angeles County, named the nation's No. 1 industrial market in the report. Los Angeles has the lowest industrial vacancy rate in the country, and Grubb & Ellis projects double-digit rent growth there in 2007.
Washington, D.C.'s fast-growing median income puts it at the top of the report's list of retail markets as well.
Overall, however, the retail market is expected to experience a slight drop in construction this year, the report said.
Until home construction and sales improve, retail development in new neighborhoods could slow, the report said.
On the other hand, the housing downturn should boost the market for apartments and cause apartment rental rates to rise modestly, according to the report.
