The following are highlights of commercial real estate market activities in selected U. S. MSAs during 2007. This information is extracted from NAI Global’s just released 2008 Global Market Report. This 148-page report, compiled by NAI Global members around the world, is a unique review and summary of global commercial real estate activities during the past year, and it provides comprehensive market data as well as geographical area and economic overviews for 213 primary, secondary and tertiary property markets worldwide.

Overview: In 2007, U.S. markets reported generally tightening vacancies and modest increases in rents. With any lingering remnants from the dot-com bust erased in 2006, the supply side is remarkably stable, as evidenced by the modest drop in the vacancy rate for Downtown Class A office space from 9.85% in 2006 to 9.55% in 2007. The 16.4% increase in the national average rental rate for Downtown Class A space translates into sticker shock for tenants with leases expiring in resurgent downtown areas such as New York City, Boston, San Francisco and Los Angeles, where supply is scarce and rents have risen more dramatically.

Suburban markets nationwide mirrored the vacancy trend without the velocity of rental rate growth. The national vacancy rate for Suburban Class A space declined slightly from 13.16% in 2006 to 12.87% in 2007, while rental rates increased 5.6% from $24.49 in 2006 to $25.87 in 2007.

Market conditions in the industrial sector also improved, with the biggest gains recorded in the bulk warehouse sector. Demand for bulk warehouse space has been strong in prior years, but not strong enough to keep pace with new supply. The national average vacancy rate for bulk warehouse space declined to 9.09% in 2007, its lowest level in over five years, after increasing four of the five previous years.

Retail vacancy rates declined modestly in all categories and are at their lowest levels in over five years. The most significant growth in rental rates occurred in regional malls, where the national average rose from $44.97 in 2006 to $46.26 in 2007. The rental rate for downtown retail climbed from $47.70 in 2006 to $48.09 in 2007.

“The outlook for 2008 calls for continued stability with moderate growth in occupancy and rental rates,” stated NAI Global President and CEO Jeffrey M. Finn. “Tenants in the most supply-constrained cities may have to consider other alternatives, such as splitting headquarters and back-office functions or relocating to lower-cost space in the suburbs.”

Atlanta: Office absorption hit the highest level since 2000 in Atlanta, but vacancies remained steady at 18-19% as new construction continues apace. Retailers are driving growth in the industrial market due to the need for distribution centers in close proximity to large retail markets.

Boston: Vacancy rates on Class A and B space in the CBD have tightened dramatically and tenants are facing significantly higher rents. Aggressive new owners are asking $75 to $90 per square foot for Class A space in high-rise buildings in the Financial District and Back Bay. Investment sales produced record-setting volume in almost every property type.

Chicago: On the whole, Chicago remains a tenants’ market with vacancy rates above historic averages. Office vacancy rates downtown have fallen to levels not seen since 2001, but there is ample supply to give tenants leverage. Leasing activity has been concentrated in Class A product with the strongest demand in the West Loop. The housing slump is beginning to impact retail rents, which dropped for the first time in over a year.

Dallas: Large spaces are easy to find in the Dallas industrial sector, but tenants looking for less than 50,000 square feet will find limited choices. Office vacancy rates remain stuck at high levels—21% downtown and 14.1% in the suburbs for Class A space—despite over 1.3 million square feet of absorption and 91,000 new jobs.

Denver: The Denver office market continued to benefit from in-migration and new job growth, which helped to push vacancy rates below 15% market-wide. Downtown vacancies actually are close to single digits with almost 1 million square feet of speculative development under way.

Los Angeles: Los Angeles County’s highly diverse economy, the second-largest in the nation, is driving growth in all sectors of commercial real estate. Large contiguous blocks of space are hard to find in West Los Angeles, Pasadena and Burbank, where buildings that were getting $20 to $24 per square foot a few years ago now command rents above $50 per square foot. The price of office buildings has skyrocketed. Sale prices in excess of $500 per square foot are now commonplace in West L.A. and certain Class A properties will top $700. The industrial market in Los Angeles is the tightest large market in the U.S., with vacancy rates for bulk warehouse a meager 3.4%.

Miami: The convergence of rising occupancy costs, living costs and a collapsing residential condominium market will return Miami’s stellar growth to earthly levels. Opportunistic investors will look to pounce on failed high-rise residential projects as prices of non-waterfront projects are expected to drop 10-40% in 2008.

New York: New York City continued its rampant growth of recent years, punctuated by a late-year pause resulting from turmoil in the capital markets. Office rents are topping $200 per square foot at the top-end, $100+ rents are now commonplace in Class A product and $1 billion+ sales transactions are no longer unusual. Midtown is a landlords’ market with a Class A vacancy rate of 5.2%. Downtown offers some relief in rent but supply is equally scarce with a Class A vacancy rate of 5.8%. It is yet to be seen if the hesitation in the market late in 2007 was merely a breather or the beginning of a broader market adjustment.

Phoenix: While office vacancy rates increased, Phoenix will continue to see growth from expanding and relocating businesses, including companies seeking relief from California’s higher-priced, supply-constrained markets.

San Francisco: The vacancy rate for office space is approaching single-digits market-wide with the vacancy rate for Class A space already at 9.4% and heading down. At $485 per square foot, prime street-front retail space in San Francisco is second only to New York City in price and ranks among the most expensive retail markets worldwide.

Washington, D.C.: Office rents continued to rise in 2007 on the strength of one of the country’s best markets for job growth and a shift in ownership from publicly-traded REITs to private equity funds. Although 10.9 million square feet of retail inventory has been added to the metro area since 2000, the market remains underserved as the growing population increases demand for retail services.