Santa Clarita leads way in area office rent increases.

Companies will be digging a lot deeper into their pockets as they renew office leases in the greater San Fernando Valley area.

Rents for the third quarter in class A office buildings have jumped 6 percent overall throughout the greater Valley compared to the same period last year, with some submarkets seeing double digit increases, according to a just-released report by Grubb & Ellis.

The average asking rent in the third quarter was $2.48 per square foot in the Valley, up from $2.41 per square foot in the second quarter and $2.33 per square foot in the third quarter of 2005.

But a number of submarkets saw far larger rent increases.

Rates for class A office space in Santa Clarita jumped 15 percent to an average asking rate of $2.82 per square foot. In the East Valley, rents rose 11 percent to $2.85 per square foot, and in the Central Valley rates jumped 9 percent to an average $2.49 per square foot, the Grubb & Ellis report revealed.

In Conejo Valley, where rents rose a comparatively modest 7 percent to an average $2.42, the relative bargains are not likely to last long.

New construction in Conejo is going out at $2.85 per square foot, and an office complex now under construction is scheduled to open with rates of $3.05 per square foot, brokers said.

"We were at record levels at $2.85 and when we achieved it, everybody bumped up a lot," said Tom Festa, a broker with Grubb & Ellis.

New construction, which reflects dramatic price increases in raw materials and land over the past several years, is providing a benchmark for landlords of existing buildings, and they are raising those rates as well.

But more than the newly constructed buildings, sheer supply is driving rental rates up for office properties.

The vacancy rate for office properties in the third quarter shrunk to 6.3 percent, making the region the tightest submarket in Los Angeles.

The East Valley registered the tightest supply, with a vacancy rate of 3.2 percent, and the Central Valley was close behind at 4.0 percent.

The West Valley had the highest vacancy rate in the region, 9.2 percent, and that has kept asking rents to a comfy $2.36 per square foot. But chances are tenants won't find relief in the West Valley for much longer.

Aware of several large vacancies in its West Valley properties, Douglas Emmett, has kept rents in its buildings down.

But two things are likely to change that.

First, Douglas Emmett owns a majority of class A properties in the West Valley, and most of the available office space.

As one broker told me, "Douglas Emmett is starting to figure out that they are the only ones with vacancies, so they can raise the rents."

Second, the company is poised to begin trading on the New York Stock Exchange this week, and a rent increase can only boost its income, and help to attract attention on The Street.