Construction costs are down and rents are up but still comfortable, say Grubb & Ellis brokers at their annual sneak preview of what's ahead for the rest of this year. The signs are good that Houston will weather the nation's present economic conditions. An estimated 70,000 to 80,000 new jobs will be created this year, a sturdy foundation amid talks of a national recession.

"Lots in the inner city are scorching," says Bill Heaven, vice president, land investment group. Houston's land appetite is increasing in all directions, he says, citing the $50 per sf asking price for West University Place. Nearly equally as hot in the land investment arena are the inner loop and north and southwest submarkets. "Houston is likely to outpace the national economy in the next 12 months with perhaps some slowing in 2002," he predicts. On the leasing side, Steve Rocher, senior vice president, says Houston property owners should brace for 4.2 million sf of new lease activity. "It will be a great year for landlords," he predicts.

The city's industrial market has had one of its best years, with vacancy dipping below 7% for the first time in a long time. Absorption will be up this year and vacancy will creep even lower, believes Doug Nicholson, senior vice president, industrial group. He is betting it will get as low as 6% for research and development flex space. Expansions at the Port and airport will give the city an upper hand in the fierce competition for industrial-based tenants and property owners. Nicholson says rents will go up this year, but only by 3%.