NEW YORK CITY–Brokers are optimistic about the real estate and financing market for the first six months of 2014, mostly due to the increasing health of the economy, according to the Real Estate Board of New York's real estate broker confidence index. The index also showed an increase in the fourth quarter of 2013 from the previous quarter, marking the first increase in confidence for the entire year.

"The commercial sector closed on a high note in 2013 and barring a large influx of space, we can expect this market to remain strong," says REBNY president Steven Spinola. "We anticipate that the residential market will grow in 2014, as buyers expand their search into the other boroughs. Foreign investors have emerged as an important aspect in the Manhattan market in the past 12 months and we believe this activity will continue to enhance the market activity in the coming year."

Adds James Nelson, partner at Massey Knakal Realty Services, “After a slow start, the improving economy and property fundamentals led to an investment sales rally in NYC late in 2013. These dynamics will carry over for this year as more large scale inventory comes on line and buyers from around the world wait with open arms.”

The commercial market confidence index reported an increase from the third quarter, up from 9.18 to 9.49. As employment increases, office leasing activity also is picking up and should continue rising over the next few months, REBNY forecasts.

Brokers note that the supply of available space is steady. They have seen more tenants readily making decisions but taking less space per employee. Keeping the supply and demand stable is expected to help keep prices solid for the next few months.

The retail market also is strong, brokers report, with local businesses being more active than in previous years. The availability of financing now and six months into the future bodes well for commercial transactions.

“We may see even more foreign capital searching for a home in the United States—and in New York City in particular—given the instability in emerging markets,” says Eric Anton, managing partner at Brookfield Financial. “Top-quality retail investment properties and well-located office buildings will be in high demand in 2014.”

Although confidence rose for the commercial market, the residential market showed a modest decline from 8.52 in the third quarter to 8.32 as brokers voiced their concerns about a lack of sales inventory and the potential for rising interest rates.

Nearly a quarter of the brokers surveyed expressed concern that the inventory shortage has been driving up prices and forcing buyers out of the market. The Confidence Index for the market six months from now reflected an increase to 8.66, with hopes that more inventory and improved financing will boost future market performance.

Despite a modest dip in confidence, residential brokers have a positive outlook for 2014. High Manhattan prices have been nudging buyers to look for more affordable options in the outer boroughs; especially Brooklyn. This growth is likely to continue, while an increased amount of activity from foreign investors is also expected to be a major driver in the residential market.