The latest downturn is a different story, however. Grubb &Ellis Co. points out in its latest report on the region that "anattempt to assess the market's true vitality is tricky" in light ofthe impact of job losses in housing-related businesses, which arebig users of office space. In addition, the Inland Empire has beenone of the hardest-hit regions in California in terms offoreclosures.

On the positive side, Grubb & Ellis researchers report theInland Empire [Riverside and San Bernardino counties] performedwell in 2007, with absorption and construction levels that nearlymatched those of 2006. But the amount of sublease space on themarket doubled on a quarter-to-quarter basis in the last twoquarters as housing-related firms either pulled out of their spacesor downsized and placed some of the excess on the market.

In a CB Richard Ellis report, overall absorption clocked asbeing down in the fourth quarter from the previous quarter, butabsorption nonetheless remained positive. And despite risingdefaults in the subprime mortgage sector, the team concludes "theIE office market remains diverse in its tenant base and has shownincredible resilience to the weakening subprime mortgagemarket."