Office Vacancies Drop, but Average Still Is High

Office vacancies in the region that includes the San Fernando, Simi and Conejo valleys edged down during the third quarter, a recent survey found, but the overall number of empty offices remained high. Lack of demand for new office space also meant that commercial land sales were virtually nonexistent, and only one small office project was completed.

The regional office vacancy rate stood at 20.4% in the three months that ended Sept. 30, down slightly from the second quarter’s 21% rate, according to data compiled by Cushman & Wakefield of California Inc., a commercial real estate broker.

The east San Fernando Valley--which includes Burbank, Glendale, Studio City and North Hollywood--saw its vacancy rate decline in the three months to 18.4% from 19.7% the previous quarter, Cushman & Wakefield said.

Several large leases were signed for buildings in the East Valley during the third quarter by such companies as Turner Broadcasting System, MTM Entertainment and First City Savings Credit Union.

But rental rates in the East Valley declined during the quarter. Average rates for top-quality buildings, for instance, fell from $23.04 per square foot in the second quarter to $22.68 per square foot.

In the West Valley, which includes Warner Center in Woodland Hills, the vacancy rate was flat at 21.1%, while rental rates were also unchanged. The area also includes Northridge, Tarzana, Canoga Park and Chatsworth.

No new commercial buildings are currently under construction in the West Valley. But the controversial Warner Ridge project near Warner Center recently won final approval by the Los Angeles City Council after a long-running legal dispute was settled. If financing is secured for the entire project, Warner Ridge would ultimately have more than 670,000 square feet of office space in five towers.

The vacancy rate in the central Valley was flat at 20.5% during the third quarter. Rental rates were stable. No new buildings were completed during the quarter, and only 15,000 square feet of additional space is being built. Cushman & Wakefield blamed the large supply of empty office space and a lack of available financing for the absence of construction activity.

In Simi Valley and the Conejo Valley--which includes Thousand Oaks, Westlake Village, Agoura Hills and Calabasas--the vacancy rate fell to 23.3% in the third quarter from the second quarter’s 24.6% vacancy rate. Rental rates also declined slightly.

Lower land costs and rental rates and proximity to freeways is helping lure businesses to the Conejo Valley area from the San Fernando Valley, Cushman & Wakefield said.