VALLEY VACANCIES UP, DOWN RATE HIGHER FROM YEAR AGO; QUARTER STRONG.

Byline: Gregory J. Wilcox Staff Writer

Vacancy rates for the San Fernando Valley area's industrial and office markets inched up slightly on an annual basis during the second quarter, with both sectors now showing signs of strength.

At quarter's end, the Los Angeles North office sector's vacancy rate increased to 15.2 percent versus 14 percent in the year-ago period. However, it was 2.9 percent lower than the 18.1 percent rate at the end of the first quarter, as high as it had been since the early 1990s, said John Thomas, research associate at Cushman & Wakefield's Woodland Hills office.

Thomas prepared the overviews for the north Los Angeles area, which includes the San Fernando, Conejo, Simi and Santa Clarita valleys.

This market is benefiting from an increase in concessions, such as tenant improvements and up to three months of free rent, as well as a decrease in construction activity.

Combined, these factors have bolstered the market's strength and contributed to a drop in vacancies on a month-to-month basis, Thomas said.

Especially encouraging is what's taking place in the technology sector.

Thomas found that movement by high-tech companies within this office market surged in the current quarter, which means that companies are leasing space rather than putting it back on the market.

``It looks like that came to a head,'' he said of the tech-sector shakeout. ``The high-tech companies that were prone to going out of business when the market turned are gone already.''

The decreasing vacancy rate, increasing rents and positive absorption point to the possible start of a recovery, he said of this sector.

Historically, the area's industrial market has been much tighter, and this was the case again during the second quarter.

The industrial vacancy rate finished the quarter at 4.9 percent, up from 4.1 percent at the end of the 2001 period. It was 4.8 percent at the end of the first quarter.

``All in all, the industrial market just doesn't change very much out there,'' he said.

Despite the gradually increasing vacancy rate, sales and leasing activity have increased over the past year and are currently healthier than at this time in 2001, with activity coming from a variety of user types, Thomas said in his assessment.

Vacancy rates increased primarily because 739,029 square feet of new buildings became available during the quarter versus 125,199 square feet in the first quarter.

A majority of this was in the Santa Clarita submarket.

Analyst Larry Kosmont, a founding partner of the Los Angeles-based Kosmont Cos., said that the area has emerged as one of the best for business in the Los Angeles metroplex region.

``The market is starting to fill in,'' Kosmont said. ``The north county area is realizing the the benefit of having newer space and lower cost of doing business.''