Fourth quarter statistics reported by Torto Wheaton, a Boston-based real estate research firm backed by CB Richard Ellis, show why brokers should be optimistic about the county's market for commercial real estate into the foreseeable future.

Vacancies in the office market have been slightly higher than the national average (8.3%) in Orange County (11.4%), but availability of industrial space was much lower for the county (4.8%) than the national average (6.7%).

"The economy has shifted from an industrial manufacturing base to a service-based economy," says Richard W. Chichester, managing director of CB Richard Ellis' Anaheim office. "What has happened here is that even the old economy companies have embraced the new economy to take advantage of technology to their benefit."

Vacancies in Orange County office product are expected to decrease to 10.7% for 2001 before rising back to a projected 11.1% in 2002. Industrial property vacancy is expected to grow during those years to 5.6% in 2001 and 6.1% in 2002. For multifamily product vacancies in the county will rise to 4.1% in 2001 from 3.8% in 2000, and then to 5.6% in 2002. Retail properties, which had a 7.1% vacancy rate in 1999, had a major upswing in vacancies in 2000 to 12.6%, and the increase is expected to continue to 13.1% this year and to 13.3% next year.

"The economy could be at risk, but real estate is very stable. The only threat is in the retail sector because consumers could stop spending," Chichester says. "Employment is growing at a faster rate than net absorption. Companies are putting more employees in less space, and in Orange County the gap is even wider."

Measured in terms of 1987 dollars, real rents (adjusted for inflation) in Orange County have compared well with rents for various types of properties nationally. In the office sector local rents were $0.96 compared to $1.02 nationally. Industrial product rents were $1.09 in the county compared to $0.97 nationally. Rents for retail property were $1.10 compared to the national average of $0.91. And multifamily housing rents were $.095 in the county compared to $1.01 nationally.

As for rental growth, the report suggests that rents for office properties will decline to a 5.7% growth rate from 15% in 2000, and then down to 3.6% growth in 2002. In the industrial market, rents will decline from 9.5% growth in 2000 to 7.1% in 2001 and 5.5% next year. Apartment properties are expected to see rents grow 5.7% this year after a 6.2% growth rate last year, followed by 4.7% growth in 2002. Retail rents, which grew 12.6% in the county last year, will grow 5.6% this year and 2.3% next year, the report says.