`DYNAMIC RECOVERY' UNDER WAY : STUDY: COMMERCIAL REAL ESTATE THRIVES.

Byline: Gregory J. Wilcox Daily News Staff Writer

More good economic news emerged for the Los Angeles area Tuesday with release of a report concluding that the region's commercial real estate market has rebounded from one of its deepest economic slumps ever.

The study by the Society of Industrial and Office Realtors concludes that a ``dynamic recovery of the industrial base'' is afoot in Los Angeles suburbs, led by activity in the San Fernando Valley and eastern sector of Los Angeles County.

It supports findings earlier this month by Grubb & Ellis Commercial Real Estates Services that a surging entertainment industry has driven vacancies in the Valley to 20-year lows and that demand for other types of space is rising.

The study reviewed and made forecasts for 129 industrial and 122 office markets nationwide.

``Manufacturing, distribution, research and service sectors of the economy are finding that appropriate facilities are increasingly difficult to find and more expensive than anticipated,'' said David A. Prior, president of SIOR's Los Angeles Chapter. He's also president of the Klabin Company, a commercial real estate firm in Los Angeles.

The group's research found that the Valley is one of the hottest markets in the Los Angeles area for both industrial and commercial space as a result of growth in entertainment, high technology and service sectors.

It's an attractive place for both tenants and buyers of property.

``As the Valley has emerged from recession it's probably one of the brightest stars as compared to the rest of Los Angeles,'' said Timothy C. Macker, president of Westmac Commercial Brokerage Co. in West Los Angeles.

The markets in the East Valley and West Valley are doing well while there is not as great a demand for space in the central Valley, he said.

Prior to the recession, the Valley was considered a bargain for companies seeking relief from high rents on the Westside and Century City. Now, rents in Encino are approaching those in Century City, Macker said.

The quality of products on the market here have improved, too.

``A lot of buildings that came out of foreclosure and were damaged in the earthquake have changed hands and they have made for a better quality of supply,'' Macker said.

The Valley's office vacancy rate fell to 13 percent last year from 16 percent in 1995. It is down from 19.7 percent in 1994.

``Things are certainly improving,'' said John Battle, a principal at Lee & Associates Inc., a commercial brokerage firm in Sherman Oaks. `` '96 was certainly better than 1995 and everybody is hoping that '97 will be at least as good as '96.''

Rental rates also started moving up in 1995, he said.

The industrial market is also in its third year of expansion, the study said. The vacancy rate fell to 4.2 percent from 6.2 percent in 1995. And it is nearly half what it was in 1994.

In response, rents have increased about 5 percent since 1995.

Here is a snapshot of other commercial and industrial markets in the region:

Central Los Angeles: There will be further tightening in the industrial sector and an upswing in office leasing. New office development is years away but there will be some limited new industrial projects built near downtown.

East Los Angeles: The group forecasts a surge of new industrial development and an acceleration of demand for office space with a rise in rental rates.

Westside: Demand for industrial space will be driven by entertainment companies involved in animation and post-production as well as software and communications companies.

San Gabriel Valley: Demand for facilities in the 160,000 square foot and up size will be strong but there will be little product available. Lease rates should increase.