Low but climbing interest rates entice builders into submarket.

NEW construction pushed Ventura County's commercial vacancy rates up slightly during the first quarter, but the region remains largely a landlord's market as developers are building new product only sparingly.

Office vacancy rates inched up to 8.7 percent, from 8.6 percent at the end of last year, while industrial vacancy rates jumped to 9.6 percent from 8.8 percent during the same period, according to CB Richard Ellis.

The new projects are "really a small amount of construction for a tight market," said Chuck Engel, first vice president for the office sector at CB Richard Ellis.

The office market was tightest in Simi Valley, Thousand Oaks and other parts of the East Valley, where the vacancy rate actually dropped to 6.6 percent from 7.5 percent, while Oxnard, Ventura and other parts of the West Valley saw vacancy rates climb to 11.8 percent from 10.8 percent.

One factor could have been the county's behavioral health department moving several of its clinics out of their Ventura and Oxnard offices and into a 57,400-square-foot facility in Oxnard. The January consolidation put more than 40,000 square feet back on the West County market.

Office leasing rates also rose about 3 percent during the quarter. East County Class A properties fetched $2 to $2.45 per square foot full-service gross for existing product (with maintenance, taxes and utilities paid) and $2.50 to $2.85 per square foot for projects under planning or construction. West County landlords are commanding $1.55 to $2 per square foot.

That all remains a better deal than leasing in high-end areas of the San Fernando Valley, such as Woodland Hills and Encino, where tenants have to pay 50 to 60 cents per square foot extra in business taxes and parking fees, brokers said.

New construction

Despite the mixed news on vacancy rates, developers of all types of properties are moving forward with what few building projects there are, as interest rates remain at historically low levels but appear to be headed upward.

MLB Golf Course LLC, developer of the Olivas Business Center, a 20-acre warehouse and distribution complex in Ventura, is building a 143,000-square-foot building there for Artistica Metal Designs Inc. The company signed a 10-year lease deal for more than $8.6 million for the space.

Once that build-to-suit project is completed, MLB plans to break ground on a speculative 132,000-square-foot building within the complex.

"We're in negotiations with a tenant right now for a quarter of it and are in preliminary discussions with two other tenants for a portion of the building," said Doug Shaw, first vice president of the industrial sector for CB Richard Ellis.

Several other buildings are also under construction.

Sanwall Properties LLC has almost completed construction of a two-story, 27,000square-foot building on Lombard Street in Oxnard. Quest Diagnostics Inc. has already leased 2,900 square feet for its medical laboratory operation.

Meanwhile, Silagi Development and Management Inc. is maintaining its reputation as the county's most prolific developer.

It is opening a 31,000-square-foot office building on Outlet Center Drive in Oxnard by early summer, while a 54,000-square-foot office building on Partridge Drive in Ventura is scheduled for a late third-quarter completion.

"If the buildings aren't coming on the market at exactly the same time, we can absorb some of that space," Engel said.

Meanwhile, industrial space got more expensive to purchase, with buyers seeing prices climb to $90 to $100 per square foot, up from $75 to $80 per toot a year ago. Still, buyers moved to take advantage of the lower interest rates while they could.

Eagle Holdings LLC paid $4.1 million in March for 48,000-square-foot industrial building on Del Norte Street in Oxnard, said Mike Walsh, executive vice president of GVA Daum Worldwide Real Estate Solutions.

And Interconnect Systems Inc., which makes semiconductor components, bought two industrial buildings totaling 22,300 square feet on Flynn Road in Camarillo for $2.2 million.

Major Events:

* Hill Street Partners VI LLC paid $11.4 million for 78,880 square feet of office space at 5141-5171 Verdugo Way in Camarillo.

* Artistica Metal Designs Inc. signed a $8.6 million, 10-year lease for 143,000 square feet on Golf Course Drive in Ventura.

* Silagi Development and Management Inc. leased out nearly 75,000 square feet at its Palms retail center in Oxnard.

* Eagle Holdings LLC paid $4.1 million for a 48,000-square-foot industrial building at 400 Del Norte St. in Oxnard.

* Interconnect Systems Inc. spent $2.2 million for two buildings totaling 22,311 square feet at 759-765 Flynn Road in Camarillo.