L.A. OFFICE, INDUSTRIAL MARKETS STRONGER.

Byline: GREGORY J. WILCOX Staff Writer

Southern California's office and industrial markets will remain on a growth course into next year thanks to investors seeking stable returns, steady job growth, busy ports and the ever present mild climate, said a USC study released Tuesday.

Both markets are solid throughout the region, said Delores Conway, director of the Casden Real Estate Economics Forecast compiled by the university's Lusk Center for Real Estate.

``The L.A. office market hasn't looked this good since the late 1980s, Orange County's resilient economy has bolstered demand for office space and the Inland Empire industrial market continues its dominance as a gateway for foreign goods,'' she said.

The North Los Angeles market, which includes the San Fernando, Conejo and Santa Clarita valleys, is in especially good shape, Conway noted.

While home and condominium sales are well under last year's levels and prices flattened, the slowdown will be offset somewhat by increased industrial and commercial construction. And the financial, legal and personal services sectors are expanding in addition to increased trade from Asia, she said.

The Valley offers a good example of anticipated growth, said Daniel Blake, director of the San Fernando Valley Economic Research Center at California State University, Northridge.

The annual value of commercial and industrial projects in the Valley totaled about $450 million over the last several years, Blake said.

That's expected to swell to $600 million this year and through 2008, an increase of 33.3 percent, he said.

``That's a little saving grace for the construction market in Southern California. Some of the slack in the residential activity will be picked up by more activity in the industrial and commercial markets,'' Blake said.

The annual Casden forecast analyzes rents, vacancies, transactions and employment for office and industrial markets in Los Angeles, Orange, Riverside and San Bernardino counties. The statistics came from Grubb & Ellis, which sponsored the forecast along with Old Republic Title Company, Old Republic Exchange Company, Wachovia Bank, Washington Mutual, the California Real Estate Journal and Real Estate Southern California.

Report highlights of L.A. County's commercial market:

The office market improved substantially this year with the average vacancy rate dropping below 10 percent for the first time in over 15 years and average asking rents rising 11 percent.

The North Los Angeles and Mid-Wilshire markets had the tightest vacancy rates at 6 percent. Vacancy rates should decline steadily in 2007 with rents up around 6 percent.

Rents soared in West Los Angeles -- up 15.4 percent -- with new tenants signing longer leases as a hedge against future spikes. Steady demand for affordable office space in the Mid-Wilshire area forced rents up 9 percent as a low-cost alternative to the expensive Westside.

L.A. County's industrial market highlights:

Downtown dipped to a historically low vacancy rate of 14.3 percent and there is talk of building new office space -- a proposed Maguire Properties tower would soar 50 stories. Rents should continue to rise through 2007 thanks to a lack of available space and steady job growth.

At 1.6 percent the Los Angeles County industrial market had the nation's lowest vacancy rate. And with a total inventory of nearly a billion square feet, it is also the largest market of its kind in the United States and rents are up nearly 9 percent from a year ago.

Conway said that North Los Angeles rents increased 7.7 percent from a year ago to 70 cents a square foot and the vacancy rate fell to 2 percent from 2.3 percent.

This market has 1.5 million square feet under construction, 14 percent of which is pre-leased.

Tight industrial supply will continue to put upward pressure on rents and property values.

``The thing about North L.A. is their rents are the highest per square foot among the submarkets and I think that's because of the construction that's going on,'' Conway said.

``It's reflecting good news for the region's economy. There has been significant demand for space in your area.''

greg.wilcox(at)dailynews.com

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Commercial/Industrial Market Snapshot

L.A. County office vacancy rates reach lowest level in over 15 years

Orange County's resilient economy pushes office rents up to new highs

Inland Empire is nation's top market for new industrial space

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Commercial/Industrial Market Snapshot (see text)