"2003 is going to be another tough year for our industrial real estate market," he predicted, speaking at the Institute for Real Estate Management's forecast breakfast late last week. "At best we may see some recovery in Oregon toward the end of '03 and the result will be another tough year financially."

The region's industrial vacancy rate started the year at 11% and at the end of the third quarter had risen to nearly 14%. After more than one million sf of negative absorption in 2001, the first three quarters of 2002 have seen another 414, 292 sf of negative absorption. The flex-industrial vacancy rate has risen from 15% at the start of the year to more than 21% on more than 300,000 sf of negative absorption through the first three quarters, up from less than 50,000 sf for all of 2001.

The numbers get even worse when just looking at industrial product completed since 1999. Vacancy at strictly industrial product is 32% while the flex sector is more than 39%. The result has been a drop in speculative construction and a rise in build-to-suit activity. Speculative construction will be scarce again in 2003, but build-to-suit activity also will slow from its 16-projects-per-year pace of this year and last, predicts Wood.