Increased sublease volume helps push vacancies higher. (Real Estate Quarterly -- Ventura County).

DESPITE almost no new construction coming on line during the first quarter, vacancies continued to climb in Ventura County.

The vacancy rate in the office sector, the county's driving force, rose to 13.3 percent in the first quarter of 2002, up from 12.7 percent in the fourth quarter of 2001 and 9.6 percent in the like period a year ago, according to CB Richard Ellis.

A major contributor to the increase was the substantial sublease space that came on the market following the meltdown of dot-coins and other tech firms.

"The market is soft," said Gerald Pelton, GB Richard Ellis' managing director. "So what we're seeing is what we expected to see. The subleasing space undermines the value or pricing of the existing new and old space. But there's light at the end of the tunnel because once this subleasing burns off, then rental rates will stabilize."

There were glimmers of hope on the industrial front, where the vacancy rate fell to 7 percent in the first quarter, compared with 8.1 percent in the previous quarter. With industrial developers needing as little as eight months from design-to-lease, activity could improve if the economy picks up later this year.

"Two years ago, when (office) developers bought their dirt, the market was very solid," said Pelton. "Now their product is coming on line and they are suffering. The industrial developer, if he's planning something right now, will be in good shape."

Sublease competition

For full service gross office rents -- where landlords absorb the bills for maintenance, utility, property taxes and janitorial services -- monthly asking rents remained stable at $2.30 to $2.50 per square foot in east county and $1.85 in west county.

But sublessors undercut the direct market, asking $1.90 to $2.10 per square foot in east county and $1.50 to $1.60 in west county.

As countywide office net absorption sunk to negative 76,614 square feet in the first quarter, down from positive absorption of 145,429 square feet in the fourth quarter of 2001, brokers continued to target a broader range of industries to fill the space. They include biotech companies, medical practices, law and insurance firms and environmental consultants.

"We've got a pretty mixed bag here," said Pelton. "There's no one singular (high tech) driving force that we had two years ago."

He said landlords and sublessors are adding concessions, such as a couple of months of free rent on a long lease and increased tenant improvement allowances, in the hopes of enticing prospective tenants to sign a deal.

Yet, several prominent structures remain vacant.

Imation Inc.'s 218,000-square-foot computer components manufacturing plant at 300 Lewis Road in Camarillo is for sale at $17.2 million -- or for lease at 75 cents per foot per month.

A 240,598-square-foot warehouse facility owned by the Gap Inc. at 5198 Colt St. in Ventura is on the block for $10.9 million, or for lease at 42 cents per foot per month.

"The market is spotty," said Mitch Conlee, first vice president of Daum Commercial Real Estate Services, which is marketing the Gap building. "There are some buildings that have been sitting vacant for some time."

Since vacant buildings prove less of a lure to investors, there were only a couple of large sales during the first quarter. In one, Topa Equities Inc., John Anderson's holding company, bought the 579,535-square-foot Financial Plaza office and retail complex at 300-500 Esplanade Drive in Oxnard for $58 million. Secured Capital Corp., an L.A.-based real estate investment bank and the Channel Islands Properties brokerage firm represented the seller and buyer, respectively.

Milgard Manufacturing Inc., which makes windows for houses, signed the only large lease deal -- a 10-year agreement valued at $15 million for the 240,000-square-foot former Bugle Boy Industries Inc. warehouse at 355 Easy St. in Simi Valley.

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RELATED ARTICLE: Ventura County

Major Events:

* Topa Equities purchased the 579,535-square foot Financial Plaza at 300-500 Esplanade Drive in Oxnard for about $58 million.

* Milgard Manufacturing Inc. signed a 10-year lease for approximately $15 million to lease the 240,000-square-foot former Bugle Boy warehouse at 355 Easy Street in Simi Valley.

* Chainson Footware Inc. signed a $1.5 million, 5-year lease for 64,620 square feet of warehouse space at 301 Rice Ave. in Oxnard.

* America Inc. signed a 5-year, $1.7 million lease for 46,656 square feet of space at 161 Plaza La Vista in Camarillo.