Office Vacancy Rate of 14% Is Best in County

Thanks to an unwillingness by banks to make construction loans, local growth curbs and expansion by insurance and entertainment company tenants, the San Fernando Valley area enjoyed the lowest office vacancy rate in Los Angeles County during the first quarter.

According to a survey by real estate firm Grubb & Ellis, the Valley area’s office vacancy rate was 14% in the first quarter, a slight increase from its 13% vacancy rate in the fourth quarter of 1990. That 13% figure was the lowest quarterly vacancy rate since 1988.

“We’re still probably the hottest market in Los Angeles County,” said Brad Wilson, an office properties specialist at Grubb & Ellis in Sherman Oaks.

By contrast, Los Angeles County--which includes the Valley, downtown Los Angeles, the Westside and South Bay areas--had a combined vacancy rate of 17.9% in the first quarter, compared with 15% in the fourth quarter of 1990. The highest regional vacancy rate in the survey was the South Bay with 20.5%.

Wilson said the slight increase in the Valley’s vacancy rate was due to a large amount of office space that came on the market at the beginning of 1991. However, that space is being leased rapidly and there are now fewer new office buildings under construction--which could lead to a shortage of space in some areas, particularly in the East Valley, Wilson said.

Buoyed by growth in the entertainment industry, the vacancy rate in the East Valley, stretching from Coldwater Canyon to the Glendale border, was just 4.9% in the first quarter.

The amount of office space under construction in the Valley region declined to 886,000 square feet in the quarter that ended March 31, from 1.7 million a year earlier. The West Valley accounted for the biggest chunk of building activity in the first quarter, with 600,000 square feet under construction in Warner Center in Woodland Hills.

The West Valley, which also includes Tarzana and Reseda, had a relatively high 18.3% vacancy rate in the first quarter. But insurance companies continued to gobble up space in the West Valley, giving that market the biggest net change in occupancy in the Valley area--105,967 square feet. It was followed by the East Valley with a net 79,740 square feet leased.

The central Valley, which includes Sherman Oaks, Van Nuys and Encino, remains the Valley area’s weakest office market. Its 15.9% first-quarter vacancy rate was lower than some other Valley-area markets. But traffic congestion, high parking fees and aging buildings are leading tenants to look for offices in other parts of the Valley, Wilson said.

The Conejo Valley, which includes Calabasas and Westlake, had a 19.2% vacancy rate in the first quarter, compared to 19% in the fourth quarter, as many small blocks of office space remained empty. By comparison, the Santa Clarita Valley had a 5.5% vacancy rate in the latest quarter.

The Grubb & Ellis survey did not include medical buildings and buildings with less than 20,000 square feet of office space.