But experts agree equally on the difficulty of forecasting where the commercial real estate markets are headed, thanks to an odd combination of factors that resemble no other exact set of circumstances that anyone can recall.

Speakers representing every facet of the commercial real estate business probed these and a host of other topics Monday, including the state of California's finances, at the annual review and outlook presented by the Beverly Hills-based Real Estate Conference Group at the Century Plaza Hotel.

Ranging from economists to brokers to developers to capital sources, investment advisers and technology specialists, the speakers looked at commercial real estate from every conceivable perspective. In many cases they labeled the current market "interesting," because of apparent contradictions like rising prices in the face of flat or declining rents.

"You may not agree with this, but we are in an economic expansion right now, and a very vigorous one," economist John Krainer of the Federal Reserve Bank of San Francisco, told the crowd of 1,200 real estate professionals.

Declaring that job growth and interest rates are the two most important economic factors for real estate, Krainer acknowledged that job growth has been weak during the recovery, but he pointed to positive signs like the rebound in business spending and a depreciating dollar that helps Southern California exporters.

Brian Lancaster, managing director of Wachovia Securities, was one of many speakers to mention the "disconnect" between prices and fundamentals, but Lancaster also pointed out that real estate loans are performing well despite the decline in fundamentals. "We get calls all the time from investors looking for non-performing loans to buy, but we just don't have any," Lancaster said.

Despite the nascent recovery, California is in a mess with respect to its business climate, according to Jack Kyser, chief economist for the Los Angeles Economic Development Corp., who listed workers compensation insurance reform as a top priority for making the state more business friendly. Kyser was one of a number of speakers who said the state faces "painful cuts in spending" even if voters approve measures on today's statewide ballot to raise $15 billion in bailout bonds for California. John Cushman, chairman of Cushman & Wakefield, was originally scheduled to talk about the office market but switched topics to urge conference attendees to vote in favor of the bond measures.

Despite the concerns about the state's financial woes and regulations that are tough on business, the speakers voiced plenty of positive comments about Southern California's commercial real estate markets and their long-term potential. Among them was Bob Osbrink, president of transaction services for Grubb & Ellis, reminded the audience that the region's commercial space markets have weathered the economic downturn better than most parts of the country, and David Prior, president of the Torrance office of the Klabin Co., said that investment demand will continue to outstrip the availability of quality industrial property for investment in the Los Angeles area during 2004.