Gruen Gruen + Associates, a research and consulting firm specializing in urban economic, market and land use/public policy analysis, makes the following predictions for the economy and real estate industry in 2006:
1. In 2006, the U.S. economy will be more buoyant than the contentious political mood of the country, with Gross Domestic Product growing between 3.4 and 3.8 percent. Local growth rates will vary above and below this positive nationwide output.
2. Areas waiting for high-tech employment to recover will begin to enjoy another upward cycle propelled by Internet-using innovations, acceptance of more biotech products, and the ability of chemical industries to avoid the drags of high oil prices.
3. Areas with global comparative advantages in entertainment, specialty manufacturing and logistics support will benefit from growth in exports and domestic demand.
4. Fastest employment growth will gravitate to suburban and exurban locations where local firms have strengths in these advantaged industries.
5. Except for condominium and town home products in areas where speculation from investors is more important than user demand, don’t bet on a bursting bubble to keep housing from being the land-value-increasing profitable real estate sweet spot.
6. Immigrants, members of Generation Y, and a slowly rising interest rate will support apartment market growth in areas where employment growth is at or above the national rate.
7. Adaptive re-uses, the replacement of obsolete shopping areas in slow growth areas, and attempts to be the first center where suburban growth is still expected will motivate retail real estate activity.
8. Ample capital will push up values across the country, but profit-bringing demands for office, industrial and hospitality uses will vary greatly between regions, with positive returns to new products restricted to uniquely strong sites.
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