Grubb & Ellis predicts soft landing in annual forecast

Grubb & Ellis Company (NYSE:GBE), one of the leading providers of integrated real estate services, released its 2007 Global Real Estate Forecast, which indicates that the U.S. commercial real estate leasing markets should continue to improve.

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Construction remains in check and the economy grows enough to fuel continued business and global trade expansion. Stable interest and cap rates will keep the real estate investment market healthy.

“We expect the economy to find a middle ground between an outright recession and inflationary growth — the elusive soft landing — thereby striking a balance between the commercial real estate leasing and investment markets,” said Robert Bach, SVP, Research & Client Services for Grubb & Ellis.

According to the report, the volume of investment transactions is likely to stabilize in 2007 following five consecutive years of gains, but it will stabilize at a high level. If interest rates and cap rates remain well-behaved in 2007, as expected, then the income component of the total return equation will once again eclipse the appreciation component, and real estate will return to its historic role as a solid income-producing investment with a small appreciation kicker.

Strong fundamentals seen for MH
The ongoing downturn in the housing market will be a boon for the multihousing rental market in 2007 as households continue to rent in hopes that home sales prices will fall further. Absorption should increase moderately, while new construction should keep the vacancy rate steady. Landlords canlook forward to a moderate rise in rental rates with the greatest risk being “re-partments” — stalled condo conversion projects that are returning to the rental inventory.

Of the top 10 apartment markets in Grubb & Ellis’ Investment Opportunity Monitor, nine are in the West and five are in California. These markets benefit from a combination of factors, including strong population growth, a high percentage of the population in the age groups most likely to rent apartments, robust job creation and high housing costs. The top multihousing markets are: River-side/San Bernardino, Calif., Los Angeles County, Washington, D.C., Dallas Fort Worth, Phoenix, Sacramento, Calif., Houston, Las Vegas, Orange County, Calif., and San Diego.

Complete copies of the Grubb & Ellis Global Forecast and regional forecasts are available on the Grubb & Ellis Company website.

Multihousing market strength forecast
Top 10 U.S. markets 2007 – 2011

1. Riverside/San Bernardino, Calif.

2. Los Angeles County

3. Washington, D.C., metro

4. Dallas/Fort Worth

5. Phoenix/Mesa/ Scottsdale

6. Sacramento

7. Houston

8. Las Vegas

9. Orange County, Calif.

10. San Diego

Markets were ranked from 0 to 100 against 13 property, economic and demographic variables.