Major business expansions were off sharply in L.A. County last year as economic uncertainty prompted some companies to hold back and other companies had a difficult time finding space.

Only 128 major business expansions took place in Los Angeles County in 2005, down 28 percent from 2004, according to a recent study released by the Los Angeles County Economic Development Corp.

Likewise, the total square footage involved in major business expansions also fell 26 percent in 2005, to 11.5 million square feet. (A major business expansion is defined as a lease or permit value exceeding $1 million, or involving more than 20,000 square feet of space.)

However, largely due to the limited supply of large blocks of space, rents increased. That pushed the dollar value of these major business expansions to just over $1 billion. While that’s roughly the same as 2004, it’s still down from a peak of $1.5 billion in 2003.

“You had two factors converging here. One was a sense of caution among businesses in the aftermath of Hurricane Katrina and its potential effect on the overall economy. The other is the extreme shortage of existing industrial space or land,” said Jack Kyser, chief economist with the LAEDC and the lead author on the study.

The slowdown stretched beyond Los Angeles County. For the five-county region examined by the LAEDC (including Orange, Riverside, San Bernardino and Ventura counties), the number of business expansions fell 27 percent in 2005 to 252.

Only San Bernardino County, with its growing population and its substantial supply of land and industrial buildings, posted gains in the number, value and square footage of business expansions. Even there, Kyser said businesses are looking ever further afield, to places like Victorville and Apple Valley.

Kyser said that since the beginning of this year, the economic uncertainty has lessened and many businesses are now bumping up against capacity constraints in their existing quarters.

“We’ve now got calls coming into our offices every day from companies looking for space to expand,” he said. “The difficulty is there’s very little space available.”

The situation is most acute for industrial land in Los Angeles County. For the last couple years, vacancies have been in the low single digits. That’s been exacerbated by the growing trend of developers converting industrial land into residential uses, especially lofts.

This has prompted concern from planners and business groups that the area’s industrial base is under attack. The city of Los Angeles’ Community Redevelopment Agency recently held a hearing to address this issue and whether to impose limitations on the conversion of industrial space to residential uses.

While downtown L.A. has received most of the headlines, this trend is also occurring in places like Long Beach and the San Gabriel Valley, Kyser said. “Even though rents for industrial land are rising, they are nowhere near what the landowners can get for residential development,” he said.

The space shortage is somewhat less acute for office tenants, which may help explain why, for the first time in the last four years, more business expansions in the five-county region (62 in all) took place in the professional services sector than any other industry, according to the LAEDC study. Next was manufacturing (46), followed by logistics/warehousing (26).