Production, employment and new orders in Orange County's manufacturing sector have all declined significantly in this year's first quarter, according to a recent report published by Chapman University in Orange. Chapman's seasonally adjusted index that measures manufacturing activity in the county has dropped from 52.7 in the fourth quarter of 2000 to 43.7 in the first quarter of 2001.

Nationally, the manufacturing sector experienced a decline for the second consecutive quarter, says Raymond Sfeir, a Chapman University economics professor who worked on the study. "There was a lag between the county and national level, since the contraction didn't hit Orange County until the first quarter of this year," says Sfeir. "We are expecting the second quarter to have a contraction, both in Orange County and on the national level, but the decline will not be as severe."

Area brokers also have yet to feel any negative impact that the slowdown may cause on Orange County's industrial real estate market, says Jeff Chiate, senior director of Cushman & Wakefield's Irvine office. "If manufacturing is down, it will affect commercial real estate negatively, but we still see the industrial sector performing strongly," says Chiate. "There is a historically low vacancy rate, very little new construction and there continues to be demand, especially from small to mid-sized users. We haven't seen a slowdown in regards to manufacturing space."