A banner year ahead.

The real estate business has become so good, that most industry veterans are praying it stays that way. With most economic indicators in a forward position and the stock market having mostly its ups, the real estate industry expects to continue to have its share of the pie over the coming year.

"Uptown is where the action is," said Peter Ricker, president Peter R. Friedman. "Downtown will change, but it will take longer."

Office product in A buildings in Midtown is getting scarce enough to affect a small ripple in construction, and meantime, rents are increasing and work letters and free rent shrinking. But space is also getting scarce for smaller tenants.

"The smaller tenants in the 5,000 to 18,000 square-foot range are getting pushed aside," said Ruth Colp, a partner with Wharton Property Advisors Inc. "It's getting hard to find them the right space because, where there were 20 deals a year ago, there are five now."

In industry specific buildings like Carnegie Hall Tower, for instance, the demand is outstripping the supply, says Steve P. Morrows, the Rockrose leasing agent.

Predicts Joanne Wittlin, a broker with Sealy Hoffman Sheehan, "The industry will be heading towards an owner's market in another year or so."

Tenants are beginning to realize they have to make faster decisions, too. They used to think that they have a space requirement but don't have to hurry, said Raymond T. O'Keefe, president Grubb & Ellis. "This year they found there weren't so many spaces around, and those were being taken before they could move. The psychology of tenants is changing, there is less lethargy."

Secondary office space that was rehabbed and modernized during the last downturn is also enjoying the successes of being helped, after helping itself.

"I have fiber optics in all our building and am making arrangements to put TI in some," said owner Sam Rosenblatt, president of Olmstead Properties, who is back in a buying mode. "These are the things you have to do."

Ricker says tenants are tired of buildings that need work. One tenant told him he's "not going to pay for a junky building" any more. "Those that achieved being repositioned have seen rents escalate substantially," he added.

Rosenblatt says there is tremendous demand for well-managed secondary buildings in Soho, Chelsea and on the West Side, particularly from small, start-up companies, many of which are relocating from California.

"We sign leases with people who have had friends come and look at the space and the deal is [just about made] through Federal Express," he said.

Tenants are also more open to seeing space on streets and avenues they would have never considered before. "There are no sacred market areas," noted Robert J. Brennan, senior executive managing director of Williams & Co., pointing to the corporate tenants now clamoring to move to Times Square.

But that doesn't yet apply to the tip of Downtown, where absorption is only inching upwards in Class A, while Class B owners convert or contemplate it.

Residents have already moved into some of the Time Equities-owned conversions, says CEO Francis Greenburger.

With over a thousand apartments already under construction, new dining opportunities like Tony Goldman's Wall Street Kitchen and Bar, and supermarkets getting ready to sign leases, the prognosis for 24/7 living in the Ozone will become a reality this year.

A subway stop or two north in Tribeca, conversions are also underway and in demand. In Hudson Square, one broker says a printer is trying to hunt down over 20,000 square feet without success.

West Side townhouses are becoming nearly as pricey as on the East Side. Large, premiere apartments are still in demand and places where brokers believe there is still value, such as around Sutton Place, are expected to become winners this year.

On the commercial sales side, prices are slowly rising, but brokers worry that the pace and pricing will get out of hand.

"As long as we stay rational, as long as there are no shark feeding frenzies where too much capital is fed into this, we can grow in a rational manner," cautioned Norman Sturner, a partner in Murray Hill Properties, that invests and manages for third parties as well as its own account.

When it comes time for investing and pricing, Sturner cheers, "It's 1978."

Product is getting "gobbled up so quickly," however, that anything of value is taking off, said Adam Weprin, a broker with Debrah Lee Charatan. "The properties we are seeing not take off have been shopped around for years, but any good property in any good neighborhood is gone."

Weprin believes 1997 will be a booming year, but "there won't be a lot of product, which hurts the brokers. In terms of what's out there, it's going to be a sellers' market.

While he says the elimination of the 10 percent "Cuomo" state gains tax "helped a little bit and made people who were going to sell a little more enthusiastic," many buyers are now waiting for a Federal capital gains cut.

The owners tell him they will leave the property to the kids and are satisfied with a small cash flow rather than paying big taxes. "If they cut that 10, 20, 30 percent, tons of people would throw their hats in the market," said Weprin. "People would certainly jump in.'

Nevertheless, when apartment buildings come on the market, brokers say, they are starting to turn over for six to eight times the rent rolls, double what they were selling for just two years ago.

Long Island is almost out of office inventory, says Kathy Giamo, senior vice president of office leasing for Reckson. She believes a time to build will come in the next 18 months. "I have not seen a market so good," she said. "Our occupancy rates are incredible."

The old industrial buildings are also being absorbed, as she leases them to office tenants.

In Westchester and Stamford, Anthony Malkin, president of W&M Properties, has tapped the market by buying well-located properties from lenders and investing in upscale renovations. While he's brought occupancy at buildings like the Merritt View in Fairfield County from 60 percent to 95 percent, suburban "rents haven't skyrocketed," he says, "because there is still space coming on the market and still companies cutting hack and still companies moving from one space to the other."

While suburban rents have gone up from the high teens to low twenties in White Plains and high twenties in Connecticut, Malkin says "You have to get a high 30 to 40 to justify new construction."

But in New Jersey, Seena Stein, president Newmark Partners New Jersey, a division of Newmark New York, paints a rosier picture.

"We're seeing spec buildings going up," she said. "We have no space and are desperate for space. We feel like we're back in the Eighties. It's scary in that I can't believe it. I thought it would take a long time."

Richard T. Anderson, president of the construction industry's Building Congress, said "One of the new ingredients early in 1997 is that a number of elements of the industry appear to be nearing a breathless rate of activity. People's firms have so much work they are having a hard time keeping up with it, and that is a dramatic change from a year or two."

While that is good news for developers, who are crunching construction numbers, it may mean the cost of getting a project built could start rising as their chosen firms get busier.