Economic conditions are not expected to improve significantly to offset the mounting available space in the marketplace, according to the research report. Job growth is forecast to turn negative this year, with Los Angeles County estimated to lose more than 23,000 jobs. The job base is expected to decline by 0.5% on an annual average basis this year. There is a ray of light in most economists' forecast as job growth is expected to turn positive by 2003.

Still, the 2002 economy is predicted to remain weak as the region's major industries slowly return to positive growth. However, developers are scheduled to add 5.1 million sf of office space in 2002, which contributes to the growing stockpile of available space. Most of the new construction was in the planning stage during the period prior to the recession, when the economy was strong. The report cites a strengthening economy, but one not robust enough to absorb over 5 million sf of new office space.

The negative absorption will push vacancy rates higher, according to research. The vacancy rate is expected to rise to 15.4% over then next 12 months or 1.5% over last year. The double punch of recession and downsizing last year resulted in a growing vacancy rate of nearly 4% to 13.9%. With unfilled new construction hitting the market and firms vacating excess space, negative absorption reached nearly 5 million sf over the last 12 months.