G&E Anticipates Moderate Economic Growth

NEW YORK CITY-Robert Bach, national director, market analysis, for Grubb & Ellis compares the firm’s 2005 forecast for the office market to being in the first inning of a nine-inning baseball game. “Economic growth should be moderate enough to propel the leasing market forward and bring absorption and slightly higher rents,” he tells GlobeSt.com. He anticipates that consumer spending will pull back a bit, there will be cooler homes sales and increasing interest rates.

To compile the forecast, Grubb & Ellis ranked 50 metropolitan areas according to their performance against a list of 18 demographic, economic and real estate criteria. Key leasing market indicators such as absorption, vacancy and rent are improving, but the pace of the recovery will be slow and geographically uneven, the office report states. The vacancy rate, which fell by less than one percentage point during 2004, is unlikely to drop any faster than two percentage points annually during the next few years, which means that the rule-of-thumb equilibrium vacancy level of 10% remains three to four years in the future.

All four major southern California markets–Los Angeles, Riverside-San Bernardino, Orange County and San Diego–won places on the list thanks to surging population growth; economies fueled by global trade, defense, biotech and other promising employment sectors; and severe development constraints. Two south Florida metros, Broward County–Fort Lauderdale–and Palm Beach County made the list largely for the same reasons.