Worldwide property markets strengthened in 2005.

Commercial property markets throughout the world continued to expand and strengthen in 2005, according to NAI Global, which has released its 2006 Global Market Report.

By year-end 2005, average rents had increased in nearly all property sectors in the United States, and vacancy rates were trending down in almost every property type.

NAI Global's annual report features information on 208 international markets, including major markets and key secondary and tertiary markets in 40 nations worldwide. The report provides market highlights, trends, demographic and business profiles, rental rates, vacancy rates and land prices.

"There is a growing sense that the recovery has firmly taken hold and that the outlook is for continued strengthening in rental rates and continued declines in vacancies," said NAI Global president & COO Jeffrey Finn.

Competition for Manhattan office space, for example, has guided vacancy rates to a four-year low and marked a shift to a landlord's market. There was a widening disparity between vacancy rates and asking rents in the Midtown and Downtown office submarkets. The Midtown vacancy rate fell from 9.1 percent to 6.8 percent, while Downtown remains in flux.

Overall, retail demand still led the way in 2005, with the industrial market mixed and the office market showing a strength not seen in several years. The "flight to quality" is slowing down as quality property becomes shorter in supply, and tenants' desire to purchase rather than rent office space has begun to fade, as inventories tightened and financing costs were expected to increase.

Developers in some areas have positioned themselves to take advantage of the next significant increase in demand, but little speculative development is evident. Nearly all key international markets were cautious as well, reacting to the current global situation and uncertainties over interest rates, the price of oil and the weakness of the dollar.