Industrial space will have an even bigger percentage increase in vacant space, Angelou predicts. The industrial vacancy rate is expected to rise to 13% this year from 8% at the end of 2001 before beginning to recover in 2003. As with office space, there's not enough business to fill new space. "About 1.9 million sf of space will be absorbed during the next two years," he said. "But more than three million sf are projected to come on line."

While building owners might not agree, Angelou said, "the good news here is that real estate space is affordable again. This, we hope, will attract the attention of some Fortune 500 companies to Austin."

About 96% of Austin's retail space has tenants, signaling its continued strength. "It will likely remain about 94% throughout this forecast horizon," Angelou said. Retailers will absorb about 1.5 million sf in the next two years, which should be matched by 1.5 million in new space, he said. "Lease rates will remain flat as we anticipate quite a bit of turnoverof small retailers," he said.

As with the office and industrial markets, the multifamily market was caught with a full pipeline of new product when the economy turned. Apartment developers built almost 9,000 units in 2001, Angelou said, with just 1,500 getting tenants.

"With the supply of units at about 14,000 for the next two years, we expect this market will fully recover in less than 12 months," he said. "Nearly 12,000 apartment units will be absorbed through 2003, according to our jobs forecast." Multifamily occupancy rates will drop by 8% or 9% this year before recovering to the low 90% point in 2003.

Angelou's real estate forecast is based on his job growth forecast for the next two years. Central Texas companies, he said, will create about 45,000 new jobs over the next two years for an average annual growth rate of 3.3%. Most of that growth, 29,000 jobs, will come in 2003 as increased spending on technology kicks in.