Economy Outlook Upbeat for Next Two Years

China and India are growing between eight and 10%, Argentina has revitalized with 7% growth and Brazil has been stabilized, he explained to a crowd of more than 100 at NAI Global's 2007 Global Market Report meeting. That growth is also migrating to surrounding areas, with Vietnam, Thailand and Malaysia seeing increased activity, he said.

And on the US front, vacancies in class A office buildings dropped two percentage points in 2006 to 9.85% and the rental rates have increased 4.8% to $36.02, Finn said. He added that with New York City rental rates coming in at $175 per sf, other US cities "do not come close." Last year, San Francisco registered $73 per sf, Washington, DC registered $55 per sf and Boston registered $50 per sf. Globally, though, Hong Kong at $200 per sf and London at $190 per sf beat out New York City.

Backing up the popularity of office space in the city, NAI New York City chairman Joseph Genovesi explained that in 2006 more than 40 office leases were signed above $100 per sf--triple the number of leases signed at the rate in 2005.

Switching property types, New York City also comes in with the highest per sf rental rate for retail, with the figure reaching $1,350 in Midtown. Leaving the city, Chicago retail rates came in at $300 per sf last year, with San Francisco hitting $290 per sf, Finn said. Globally, no other city has reached New York City's retail rents, but Hong Kong at $1,150 per sf and London at $1,050 per sf are closing the gap, he added.

More to the point in the local retail sector, Genovesi added that in the city there are 14 prime retail corridors where ground-floor asking rent is approximately $329 per sf.

However, while NAI Global stands behind a rosy outlook for the next few years, the market should be prepared for a recession. "There is no chance the US economy doesn't do fabulous over the next two years," said Peter Linneman, chief economist, NAI Global, and principal, Linneman Associates. "But uncertainty is the enemy."

By 2009, he added, the country will have experienced more than eight years of growth; however, "just when you think it is safe and there will never be a recession again, we will have a recession." A leading factor behind that recession will be the presidential election, the ensuing turnover at the federal level and the uncertainty it brings, he added. "This uncertainty will cause a pause," Linneman said. "A recession is one of year of no growth, all because we pause."

He projects this to happen by 2009, early 2010. "There will be two years of good times, then put on your helmet," he said. "Be cautious."