Better Market for Commercial Space Forecast : Real Estate: Slightly higher demand should stabilize the Southern California market, Grubb & Ellis Co. says.

After a dismal 1991, slightly higher demand for office, retail and industrial space should stabilize Southern California’s beleaguered commercial real estate market this year, according to an optimistic report released Thursday by Grubb & Ellis Co.

“In 1991 we were on the deathbed,” said Robert O. Bach, director of research for the San Francisco-based commercial real estate brokerage firm. “We’re sitting up now, and we’re conscious.”

In its first forecast for Southern California commercial real estate, the firm predicted after examining eight markets in the five-county Southern California area that most would experience slight increases in commercial real estate leasing and sales activity.

The report said it expects the improvements to occur despite continued flight of manufacturing jobs from California, downsizing by many industries and the addition of 1.7 million square feet of office space in already bloated downtown Los Angeles.

“Through the balance of the decade, the office market should experience healthy absorption, though not as rapid as the levels of the 1980s,” Bach said. “Healthy job growth in the sectors of the economy that need office space should keep the market growing.”

One of the areas where the real estate market is expected to show a significant improvement, the report says, is Ventura County, where only 50,000 square feet of office space is scheduled to be built. Office vacancy rates are expected to drop from a 1991 high of 25% to under 22%.

The report also predicts that the vacancy rate will drop slowly this year in the Inland Empire areas of Riverside and San Bernardino because of healthy employment and population growth.

In Orange County and Los Angeles County, the outlook is less rosy.

Demand for both retail, industrial and office space is expected to remain lackluster in Orange County, which experienced major overexpansion in the late 1980s. The report noted that activity at many retailers, fast-food operations and gas stations “has slowed dramatically because sales are down.”

Office vacancy rates are expected to rise in downtown Los Angeles, which is faced with absorbing 1.7 million square feet of space from buildings under construction. What’s more, the report adds, developer Hillman Properties apparently intends to proceed with plans to construct an 828,000-square-foot office building near downtown.