Office Vacancy Rates in L.A. and O.C. Continue to Drop

The office market in Los Angeles and Orange counties continued to see vacancy rates drop during the third quarter, but tenants remained highly sensitive to rising rents.

The overall vacancy rate at the end of the July-September period slipped to 11.5%, from 11.8% at the end of the previous quarter, according to Delta Associates, the research arm of Transwestern Commercial Services. Rents in the area continued to rise 4% to 5% on an annualized basis.

Rent increases, which have been particularly steep in such markets as Santa Monica and Newport Beach, have forced many price-conscious tenants into more affordable areas, including the South Bay and Miracle Mile, according to the report. In Orange County, many high-technology companies have found relief from high office rents by leasing so-called flex-space, which combines office and industrial-like research operations in low-rise office parks.

Strong demand by high-technology and Internet-related companies helped push down the vacancy rate in Los Angeles County to 12.2% at the end of the third quarter, from 12.7% in the previous period.

In Orange County, strong demand for office space was tempered somewhat by the completion of many new buildings. As a result, the third-quarter vacancy rate rose to 9.3%, from 8.7% in the previous quarter.