David Lereah, the association's chief economist, said 1.2 million payroll jobs were added to the economy during the first five months of this year. "We could see an average of 210,000 to 240,000 new jobs per month over the next two years, which will create additional demand for commercial real estate," he said.

"A rise in net absorption of commercial space is expected over the course of the year. Rents are firming and all sectors can expect higher rents in 2005 as vacancy rates decline," Lereah said.

The association's analysis covers a wide range of statistics and market rankings for the major commercial sectors, including the office, retail, warehouse and multifamily markets, as well as market sector forecasts using data provided by Property & Portfolio Research.

National Association of Realtors President Walt McDonald said office properties continue to dominate investor interest. "Two out of five investment dollars spent in commercial real estate are on office buildings," he said. During the first quarter, $27.0 billion worth of commercial real estate traded hands. Of that, 41 percent was spent on office buildings.

Net absorption of office space, which includes leasing of new space coming on the market as well as space in existing properties, is projected to rise significantly this year to 77.6 million square feet from only 28.2 million in 2003. Even so, a large volume of new office space means vacancy rates in the 54 markets tracked should decline only 0.5 percentage points to 17.4 percent in 2004. With plentiful supply, office rents are expected to average 1.9 percent lower this year before rising 2.4 percent in 2005.

The apartment rental market—multifamily housing—should experience a net absorption of 143,900 units in 2004, compared with 131,500 last year. The average vacancy rate is expected to hold at 7.1 percent in 2004, unchanged from last year, with average rent forecast to rise 0.3 percent in 2004 and another 1.8 percent next year.

With rents forecast to rise slightly, it might be just the time to consider buying a home. The strong job-growth indicators will also push existing home sales to set records. When adding in higher interest rates projected for the fourth quarter, Realtors are seeing more interest from first-time buyers who think the timing is right to move from an apartment into a house of their own.

Information provided in this column is presented by the Realtor members of the Silicon Valley Association of Realtors at www.silvar.org. Send questions on any topic to jnewton@jnpr.com.