Office Vacancy Rate Rises to 14%; Leasing Slows

The office vacancy rate in the San Fernando Valley edged up to 14% in the third quarter from 13% a year earlier, while leasing activity dropped 20%, according to Grubb & Ellis Commercial Real Estate Services, a division of the San Francisco-based real estate company Grubb & Ellis.

The biggest contributor to the higher vacancy rate was the West Valley region that includes Canoga Park, Tarzana and Woodland Hills, where the rate was 19% during the quarter that ended Sept. 30. The report said the area has significant new office space, including the 250,000-square-foot Warner Gateway, and said some companies are leaving the West Valley for less expensive space in Calabasas, Agoura, Thousand Oaks and Westlake Village.

The East Valley region that includes Burbank, North Hollywood, Studio City and Universal City was the Valley’s strongest market, with a vacancy rate of 9%, the report said. That area has benefited from growth in the entertainment industry, the report said.

Grubb & Ellis also noted a decline in Valley office construction in the third quarter, to 2.37 million square feet under construction from 2.85 million a year earlier. And despite its high vacancy rate, the West Valley is the busiest building market with more than 1 million square feet of office space under construction.