Institutional investors are hungry for Houston property, says Robert Kramp, Grubb & Ellis' regional client services manager and the report's author. He says the interest is driven by stable local property prices driven and strong real estate fundamentals.

The report was less enthusiastic but still optimistic for the industrial market. More than 600,000 sf of new product will deliver this year. Overall vacancy will level out to just below 8%. "Eventually, (vacancy) dipping further in early 2003 as construction levels descend to nearly zero and tenant interest recovers with the national economy," the report assesses.

Kramp tells GlobeSt.com that this somewhat cheery outlook for industrial product applies to Houston as a whole, with the exception of the northwest corridor. There, he says, is the region's soft spot.

On the retail side, 2002 will be a tough year as regional malls and neighborhood centers weaken due to nationwide retailer shutdowns, according to Grubb & Ellis. The impact of Montgomery Ward's bankruptcy is still choking some center as is JCPenney's exit of several Houston-area locations. The end result is a projected 527,000-sf negative absorption. "Retail tenants are advised to leverage their lease commitments for greater concessions while active investors should be on the spy for local property bargains," researchers say.

The multifamily market spiked last year, but forecasters say it will soften this year, but still stay ahead of other parts of the country. Kramp points out in the report that Merrill Lynch recently upgraded Houston's multi-housing market to "healthy," the only Sun Belt city in that category.

Abundant available land is fueling brisk sales although the 2001 pace was somewhat slower than in prior years. "The cooling economy," says the report, "which brought sluggish home sales, is the culprit behind the lagging trend." The 2002 population forecast calls for a 3% growth. That coupled with incentives to buy homes "will revive land demand at the end of 2002. The current situation offers many opportunities for the patient investor."

The forecast doesn't take into account the dramatic effects of the Enron meltdown, but Kramp's analysis has Houston's office market rebounding slowly and eventually posting positive growth again by early 2003. Kramp concedes that prediction hinges on no additional jarring national events. Overall, Houston is well positioned to rebound right along with the rest of the nation and possibly ahead of many other high-profile markets.