The slowing economy is starting to take its toll on the outlook of Los Angeles County business owners.

The pace of business expansions in the county and region slowed sharply in the first half of the year as owners grew more cautious and available space has become increasingly scarce.

There were just 67 major expansions defined as a lease or building project of at least $1 million or at least 20,000 square feet in the first six months of 2006, down from 72 a year earlier. And across Southern California, only 128 major expansions took place, down 17 percent from last year, according to the Los Angeles County Economic Development Corp.

“All the discussion about a slow down in the economy, interest rate concerns, the housing market slow down it’s all weighing on the minds of company decision makers,” said Jack Kyser, the economic development organization’s chief economist. “Our regional managers are noticing a much more cautious attitude among local companies now.”

That caution is being compounded by the scarce supply of industrial space and a decreasing supply of space on the commercial side.

The industrial vacancy rate in Los Angeles County is under 2 percent, meaning available space is virtually non-existent. Even the Inland Empire is feeling the effects as so many companies from the L.A. area have taken space there, pushing down the industrial vacancy rate.

Office space is also tighter in L.A. County, with vacancy rates in most portions of the county falling at least one percentage point in the past year.

“Even if you’re looking to expand, it’s becoming increasingly difficult to do so in the Los Angeles area,” said Candice Flor, the research project manager with the LAEDC who compiled the data. “There simply isn’t enough product, especially on the industrial side.”

Nonetheless, some businesses chose to expand during the first half of the year. One of the biggest transactions included Air Force Space and Missile Systems Center’s new 535,000-square-foot research and development facility in Los Angeles.

Across the five-county Southern California region which includes Los Angeles, Orange, Riverside, San Bernardino and Ventura counties professional service firms led the way with 36 major business expansions.