Despite the recent reports of an impending recession, top real estate markets in the US continue to post strong growth. While there has been substantial building in many major US markets, particularly in the suburban areas, absorption has been strong enough to keep up with the new supply being delivered to the market. Until absorption rates decline, there is plenty of reason to remain optimistic that the real estate boom isn't over yet.

"Growth in the real estate markets, as evidenced by the absorption of space, has been very strong nationally, with many major markets posting 5% to 7%, and in one case, 10% expansion," said Ross Moore, Vice President and National Director of Research for Colliers International, a global commercial real estate firm based in Boston, Massachusetts. "If there is a recession coming, the real estate markets don't show any signs of it yet," he added.

A year end survey of top markets, including Atlanta, Boston, Chicago, Dallas, Denver, Los Angeles, Miami, Minneapolis, New York, Phoenix, St. Louis, San Francisco, San Jose, Seattle, Toronto and Washington DC indicates that vacancy rates in most markets remain quite low, despite the economic jitters that started last year with the decline of the Nasdaq beginning in April. Some vacancy rates are remarkable, with Boston, Washington, DC, Seattle,

Toronto and San Jose reporting vacancy rates of less than 4%. New supply has been added to most major markets, but at a more measured rate than in previous periods of expansion, accounting for stable vacancy rates. Demand for new space continues to be strong in most major markets. The only cloud on the immediate horizon is that many markets report that an increase in sublease space is anticipated for 2001. Moore indicated that the most vulnerable properties would be older buildings in fringe locations.

Published: January 19, 2001

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