Pittsburgh has staved off the worst of the recession better than most other cities, and 2010 should be no exception, according to Grubb & Ellis Co.

In a 2010 forecast released yesterday, the real estate services and investment firm based in Santa Ana, Calif., sees another gloomy year for commercial real estate and office markets nationally, although one marginally better than 2009.

But at the same time, Grubb & Ellis is predicting that the Pittsburgh region will continue to defy national trends. It said more space was being occupied than vacated in most sectors, and that vacancy rates in Pittsburgh have stayed below national averages during the recession. It expects both trends to continue this year.

One reason is that Pittsburgh did not experience the same development boom in the last decade that many other cities did, meaning there wasn't as much of an oversupply when the bottom fell out of the economy. As a result, occupancy rates have been fairly stable, the company said.

The Pittsburgh economy also proved to be diverse "in the right places," such as energy, health care and education, said Pamela Lowery, assistant vice president, transaction services, for the Grubb & Ellis Pittsburgh office.

"Is Pittsburgh doing phenomenally? No. But we haven't lost much ground over the last year. We've remained steady, and that's a plus," Ms. Lowery said.

"Markets that muddle through the good times tend to muddle through the bad times," added Bob Bach, senior vice president, chief economist, of Grubb & Ellis Co.

Pittsburgh never saw more than 1 million square feet of office construction in any given year in the last decade, much less than the level of speculative activity in many other cities. Although that helped the region through the recession, it also means that demand may exceed supply this year, particularly in sought-after areas such as Oakland and Cranberry, Ms. Lowery said.

As a result, landlords could be in the position to raise asking rates and cut concessions in some areas because of restricted office space. In fact, Grubb & Ellis is forecasting that Class A rents could increase by 20 cents a square foot to $21.20 by the end of the year.

It also sees rental rates for research and development/flex space and warehouse/distribution space on the industrial side increasing by 25 cents and 18 cents a square foot, respectively, because of tight supplies. It expects vacancy rates to drop 40 basis points to 8 percent in 2010, in part because of space being gobbled up by new leases.

Although Pittsburgh has enjoyed relatively low vacancy rates the last few years, "the downside is now that the economy is recovering and the Pittsburgh market is again ripe for development ... the capital necessary to break ground on speculative new construction in order to meet demand is unavailable, and obtaining build-to-suit financing isn't much easier," the company said.

Retail is a different story.

Grubb & Ellis is predicting that the retail market will be facing another tough year, with Pittsburgh being no exception.

"Decreased consumer spending has caused retailers to carefully manage inventory and do their best to attract value-conscious customers. Many Pittsburgh-area retailers are likely to attempt to renegotiate leases with their landlords in 2010 in order to offset slumping sales, while others may simply close their doors, though the number will be fewer than in 2009," it stated.

While there are bright spots such as the new McCandless Crossing development and expansions by retailers REI and Five Below and restaurant P.F. Chang's, the volume probably won't be enough to lower vacancy rates and prevent rental rates from dropping, the company said.

On the whole, Grubb & Ellis does not see retail rebounding until the end of the year, particularly with unemployment still at high levels. Commercial real estate typically lags the job market, the firm said.

"[People] need to spend money for retailers to make money. People are being very cautious with their dollar," Ms. Lowery said.

Nationally, Grubb & Ellis is predicting that office vacancy rates will hit 18.5 percent to 19 percent by the end of the year, the highest point since the firm began monitoring the national market in 1986.

Any rebound is largely dependent on job growth, and Grubb & Ellis does not see any sustained increase in employment until at least the second half of the year.

It is predicting a quicker recovery on the industrial side, particularly with recent "upticks" in economic indicators such as global trade, freight shipments and manufacturing activity.

"This, along with the weakness of the dollar, hints that a recovery in the industrial market could be on the horizon," the company said.

Mark Belko can be reached at mbelko@post-gazette.com or 412-263-1262.

"Money Q&A" and "Company Town" are featured exclusively at PG+, a members-only web site of the Pittsburgh Post-Gazette. Our introduction to PG+ gives you all the details.