Civic boosters point to the Foundry, the GTECH headquarters and the American Locomotive Works as signs of the revitalization of Providence.

The renovations, and new construction, have certainly put a fresh face on the old industrial city.

But a peek inside the buildings, and others throughout the state, tell another story about Rhode Island’s economy.

There are empty offices, sometimes whole floors. In fact, there is more vacant office, retail and industrial space in the state now than at any time that commercial real estate brokers can remember.

The vacancies fill out the story of where Rhode Island has been, where it stands now and how soon the state’s recession can be turned toward recovery.

“2007 was the year of the crane,” Jay Fluck, executive vice president and partner at CB Richard Ellis/New England, told a crowd of real estate professionals at a conference last week. He referred to all the construction projects that were under way.

“We thought that if we built it, they would come,” he said. “We built it, but they did not come.”

His market overview for Rhode Island reported that 1.3 million square feet of office space was built or renovated last year. That’s a 13-percent growth rate, well above annual average growth rates of 4.7 percent earlier in the decade.

All the new space has not been occupied. And 260,000 square feet has been vacated during the recession, as companies contracted or closed. As a result, there is now 2.3 million square feet of vacant space statewide, or 17 percent of all available space. That’s a big number.

Fluck told the crowd that “equilibrium,” or the ratio at which tenants and landlords come to the table on equal footing to do a deal, is 12 percent of all space.

To get back to that level would take 4½ years, based on the prior years’ average of filling 158,000 square feet a year.

In Providence, it’s a more concentrated issue, with 914,000 square feet vacant.

And here’s the problem:

“We do not see in the pipeline any pent-up demand,” Fluck said.

So what ignites the stalled market? What has to change for tenants to start filling vacant space?

It’s the same answer for what ails most of the economy, and why the state and country are slipping deeper into recession.

The credit freeze has to thaw. Big banks have to start lending again and start making credit easier to obtain. Developers, unwilling to lease or buy as the value of property declines, have to take some risk and put more equity into projects to free up bank loans.

That may not happen soon, however, according to three panelists who spoke at the CB Richard Ellis conference.

Ned Handy, president of commercial real estate finance at Citizens Bank, said, “There is a confluence of capital contraction and liquidity issues.” He added that because Citizens is owned by the Royal Bank of Scotland, he has firsthand experience of the global economic slowdown that has tightened lending worldwide.

He said the key to making deals is going to be the solid, long-term relationships between lenders and investors. “With limited capital, banks will focus on established customers,” he said.

J.D. Dell, senior managing director and portfolio manager of Trammell Crow, said, “It’s not a supply problem, it’s a credit problem and a miscapitalization problem moving through the markets.”

He said that with many national lenders out of the market, local community and regional banks could become a source of borrowing, even if the deals would be much smaller than in the past.

Still, he said, unlocking credit for the commercial real estate market to return to the vibrancy of early this decade may take years. He also said there may be many more defaults.

“The pessimistic view is that ’09 would be a bloodbath in the country,” he said.

Andrew Nathan, founder of Meritage Properties, said his real estate investment company is still doing a few deals, but they have to be fundamentally sounder than ever.

He said a lot of capital is staying on the sidelines “to wait to see how bad the recession gets, and to figure out where the market is. What’s a property worth?”

He added, “Until the secondary market stabilizes, not many lenders will put money out … there will be higher unemployment, no growth … 2009 will be a pretty ugly year.”

Rhode Islanders caught in the recession know all about the decline in the residential real estate market as their houses lose value and are harder to sell.

But they may be less aware of the commercial real estate market, where offices, retail space and industrial buildings are leased, bought and sold. That market is equally important to the health of Rhode Island’s economy.

To understand it, all you had to do was observe the 200 somber people at last week’s conference who are having a harder time making a living in the frozen business environment.

At the end of the conference, Alden Anderson, first vice president and partner at CB Richard Ellis, looked out at the dour faces and tried to leave them with something upbeat.

“Out of chaos,” he said, “will come opportunity.”

Let’s all hope so, soon.

jkostrze@projo.com