Professor Wheaton noted that while the hallmark of real estate in the '90s overall will be recovery and slow growth, certain property markets will begin to show returning strength. In the residential market, single-family housing is one of the bright spots, in spite of demographic projections showing a 25 percent decline in the number of new households in the 1990s compared to the last decade. Based on new econometric models focusing on the interactions between the apartment and single-family markets, the MIT study expects the apartment market to absorb the brunt of the decline in household formation. Single-family house prices should continue to rise as they have over the last 30 years, easily exceeding the inflation rate. While office construction should not resume much before the end of the decade, the MIT report does expect office vacancy rates to decline and rents to begin a strong recovery in the next year or two.
Space is currently a cheap commodity in the United States.
Companies could think about what space they will need and lock it in at today's prices. The picture for the industrial market is more mixed. The outlook is for continued improvement in US productivity-good news for the economy but not as good news for owners and builders of manufacturing and distribution space. The MIT study finds that the demand for manufacturing space depends on industrial output, so the expected growth in this sector should generate some demand for additional space. However, US firms have become increasingly sophisticated in inventory management over the last decade, so little new distribution space will be needed in the aggregate.