The report, titled "Sluggish Economy Could Increase U.S. Office Mortgage Delinquencies Over the Long Term," says that there were no reported office loan delinquencies in the Los Angeles region as of July 15. However, the report uses the example of the Los Angeles combined metropolitan statistical area (CMSA) to exemplify that economic factors driving population and employment growth for major U.S. office markets are expected to remain sluggish, resulting in increasing mortgage delinquencies throughout the nation. The Los Angeles CMSA comprises Los Angeles and Orange counties and the Inland Empire, which includes Riverside and San Bernardino counties. At the end of the second quarter of 2002, the Los Angeles CMSA had an average vacancy rate (15.6%), the report says.

Despite the prospect of higher delinquencies, the report says that, over the next five years, the Los Angeles CMSA is expecting strong population and employment growth in the areas of entertainment, foreign trade,aircraft and parts, communication and business services.

The report says, however, that expected employment growth in the Los Angeles CMSA, as well as in other U.S. office markets, may not be sufficient to create a level of office demand to absorb the currently abundant oversupply of office space or encourage company expansion.