City Moves to Purchase More of Its Office Space : Cost-cutting: Officials are taking advantage of the soft market to become owners of buildings and to get better lease deals.

In an effort to save money and capitalize on the depressed downtown commercial real estate market, city officials are looking to become owners of their own office buildings and are seeking better lease deals through competitive bids.

The shift in policy, approved last month by the City Council, is designed to reduce leasing costs for the City of Los Angeles, which spends about $14 million a year to lease 933,660 square feet for 3,550 employees.

Since adopting the policy, officials have purchased at least three office buildings to house parts of the city transportation and personnel departments and the city clerk’s office.

It could not be learned Tuesday how much the city spent to acquire the buildings.

City officials aren’t sure how much money they will save under the policy, but they are hopeful that it will result in better deals on office space.

“There’s a soft office leasing market out there right now and the city wants to take advantage of that and lower our long-range capitalized costs of leasing,” said John G. Cotti, assistant general manager of the city’s department of general services.

Cotti noted that by seeking bids, “we have a competitive process that hopefully will result in some savings.”

Analysts expect the city’s new policy to at least temporarily shore up demand for older and less expensive “class B” and “class C” office space, which increasingly has been vacated by law firms, accounting offices and others lured to gleaming new office buildings by hard-pressed landlords.

The city’s new competitive bid process for leases will favor the older buildings because they usually offer the lowest rents over a long term.

“The new policy should rejuvenate demand for these second- and third-tier office buildings that can be rented at a discount,” said Edwin Isenberg, who served on the city’s leasing advisory panel and is managing partner of the Donaty Group, a Los Angeles-based commercial brokerage firm.

Overall, rents for downtown office space have fallen as much as 20% to between $15 and $33 a square foot for the most modern office space. Still, about 22% of downtown Los Angeles’ 34 million square feet of office space is vacant.

Cotti said that in Los Angeles “there is no legal requirement” to seek competitive bids.

He added that because the city has rarely sought large amounts of office space in the past, no formal process was set up to solicit bids.

But during the past six years, the office leasing needs of city government have grown considerably because of the establishment of several new city departments and programs, such as the Department of Environmental Affairs and Housing Preservation and Production.

As the city’s office space needs increased, officials realized that they were not being offered the best deals despite the current soft market.

City officials said they have been offered office space for as little as $1 a square foot, per month. But they said the actual price would often climb once the city had invested time and money in serious negotiations.