SALT LAKE CITY — Although the economy is performing well relative to other recessions, expect recovery to be initially tepid, advises Dr. Raymond Torto, principal and managing director for Boston-based Torto Wheaton Research.

"No one is going to put money on the table until they see improvement," Torto said Tuesday in his discussion on "Current Perspectives on Real Estate Markets" during the inaugural CoreNet Global Summit event in Salt Lake City, Utah. "Although we are impatient, we must temper our expectations."

Office vacancies are expected to hit nearly 16% by year-end 2002 before improving to 14% in 2003. The decline in occupied space is due primarily to what Torto calls a "structural change." In response to the recession, companies simply are hiring fewer employees.

The Austin office market leads the nation in terms of vacancy rates, which jumped from 4% in fourth-quarter 2000 to 19.9% in fourth-quarter 2001, and then to 23.3% in first-quarter 2002. Markets with high exposure to the technology-driven demand surge of 2000 — including San Francisco, Seattle, Boston and San Jose, Calif. — also experienced significant vacancy rate increases.

The journey back to health will be longer for the industrial sector. Torto predicts that industrial markets will recover in approximately 18 months because new supply will outpace demand in several larger industrial warehouse markets. Atlanta has highest vacancy rate, with levels rising from 10.1% in first-quarter 2001 to 15.7% in first-quarter 2002.

The five-day CoreNet Global Summit is the inaugural event for Atlanta-based CoreNet Global, an association formed by the merger of the International Development Research Council (IDRC) and the International Association of Corporate Real Estate Executives (NACORE).