Commercial realty rides a strong economy.

During the recession of the early 1990's, job losses outpaced job creation, the consumer price index reached an all-time high and Wall Street was in disarray. What a difference a decade makes!

The U.S. economy is in its fifth year of prosperity. Unemployment is at an all-time low at 4.3 percent; inflation is in check; and Wall Street is producing strong returns.

No other industry has benefited more from this revitalized economy than the commercial real estate market. New York City's office market recovery, for example, is one of the most dominant in recent memory. Manhattan's Midtown, Downtown and Midtown South segments are sustaining levels of leasing activity not seen in more than a decade, triggering a sharp decline in available space. In 1999 alone, Midtown's office availability rate dropped two percentage points to 6.1 percent - well below supply/demand equilibrium. The Downtown availability rate declined by three percentage points during the past year to 9.4 percent, while Midtown South saw its availability rate drop to a meager 4.5 percent.

In light of the revitalized real estate market, one questions arises: How much longer can this last?

The real estate market's stellar performance over the past few years has led some industry insiders to speculate that a downturn is near. But there are no obvious indicators to support such a theory. Without a doubt, there still is a positive dynamic in the market. Leases are being signed, and capital is still flowing. Strong demand for quality office space has even spurred new development such as Boston Properties' 5 Times Square, the Durst Organization's 4 Times Square and the Rudin Organization's 3 Times Square. Other new developments include an 850,000 square-footheadquarters building for Bear Stearns at 383 Madison Avenue, a 750,000 square-footheadquarters for Time Warner at the old Coliseum site at Columbus Circle, and a 1 million square-foot headquarters for Morgan Stanley at the so-called "Rock West" site at 48th Street and Seventh Avenue.

In addition, owners are renovating Class B and C properties to satiate the growing demand for space in the marketplace, particularly from the high-tech sector.

Keeping all this in mind, and despite the inevitable peaks and valleys along the way, the office market should experience another exceptional year in 2000. While there still are many challenges facing the real estate industry, the opportunities that will arise from these challenges should keep the market fundamentally sound.