One factor driving down vacancies is that construction is not keeping pace with demand. That’s attributed to the lack of buildable land and increasing construction costs. The industrial market maintained a five-year trend with the vacancy rate once again sinking. The company said that the market is being driven by unprecedented investment interest and activity. Supply remains extremely low but lease rates are not skyrocketing. For the county, the vacancy rate fell to 1.8 percent from 2.2 percent a year ago. The Valley vacancy rate was 2.2 percent. Lou Horne, executive managing director for the Greater Los Angeles area, said that the tight industrial space has pushed some companies that would have located close to the ports into the east portion of the county or the Inland Empire. Jack Kyser, chief economist at the Los Angeles County Economic Development Corp., said that retail and residential developers are competing for industrial land. But there is demand for industrial uses – up to 1 million square feet in South Los Angeles and a like amount in the Valley. “We’ve got to be more innovative in our land use,” Kyser said. Gregory J. Wilcox, (818) 713-3743 [email protected] 160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set! AD Quality Auto 360p 720p 1080p Top articles1/5READ MOREWalnut’s Malik Khouzam voted Southern California Boys Athlete of the Week And the company said that 2005 will be remembered for swinging in favor of landlords, Jeffrey S. Pion, executive vice president of the Beverly Hills office, wrote in an assessment of the quarter. The company also believes that the investment market will remain healthy. “Contrary to what I’ve read, we still see a very warm to hot lease market and as the vacancy rates continue to drop, we’re going to see rental rates continue to escalate,” said Bart Reinhard, senior managing director for the company’s Los Angeles North office. All of the county’s markets recorded rate increases in the quarter from a year ago. Downtown had the biggest increase, 12.8 percent to $2.40 per square foot. Valley leases averaged $2.17 a square foot, up an annual 5.8 percent. Office and industrial vacancy rates in the San Fernando Valley and the rest of the Los Angeles area continued shrinking in the third quarter in response to strong demand and tight supplies, a big commercial real estate company said Wednesday. In the big office market, the Valley had the lowest vacancy rate in the county, 7.7 percent, an annual decline of 15.4 percent, said CB Richard Ellis. The South Bay had the highest rate, 18.7 percent. While the company characterized the office market as “lumpy,” it continued to exhibit strong fundamentals, and the third quarter trend will likely continue for the rest of this year and into 2006.