(FORTUNE Magazine) – By grabbing the headlines, last October's stock market crash made people forget that another investment isn't doing so well either -- commercial real estate. The new tax law killed some of real estate's appeal, while faltering regional economies have driven office vacancies to frightening levels, which a recession could carry even higher. ''Liquid investments have been beating the pants off property,'' says Larry Biehl, a director at Bailard Biehl & Kaiser, an investment advisory firm in San Mateo, California. Robert H. Gidel, managing director of Alex. Brown Realty Advisors, suggests a mundane investment -- warehouses in Newark, New Jersey. Or maybe Cleveland. Don't laugh. Over the past eight years, warehouses have produced better returns than either office properties or retail space (see chart). Now, with manufacturers fueling the economy and picking up exports, Gidel expects to see demand grow for warehouse space in port cities like Newark, Los Angeles, Philadelphia, and Boston, and in distribution centers such as Cleveland, Columbus, and Nashville. A few companies, including Trammell Crow, offer real estate investment trusts (REITs) that buy into industrial properties. ''There aren't enough industrial REITs,'' says Gidel, ''but there will be more.''

CHART: NOT AVAILABLE CREDIT: SOURCE: FRANK RUSSELL, CO., NCREIF, ROBERT GIDEL CAPTION: IS REAL ESTATE REBOUNDING? Warehouses have returned the most to investors since 1980. DESCRIPTION: Rate of return to investments in offices, retail stores and warehouses; rate of inflation, 1980-1987, with estimates for 1988 and 1989. Color illustration: Warehouse, ship, loading crane.