Los Angeles County’s nascent commercial real estate recovery seemed to sputter in the first quarter as nearly 35,000 square feet of space returned to the market. Yet the region’s brokers and landlords remained surprisingly optimistic – and with good reason.

The first three months of the year are often referred to as the “hangover quarter,” when brokerages see little action after a flurry of end-of-year deals. But a combination of antsy tenants, aggressive landlords offering concessions and a slowly improving economic climate contributed to solid deal volume.

“A lot of these tenants have been sitting on the sidelines for a couple of years, and they are realizing that the market may start getting better. (They) are saying we better make a decision now before the market changes,” said Jonathan Larsen, Transwestern’s executive managing director for the west region. “That’s probably the No. 1 thing that I’m seeing and that’s led to an increase in activity.”

Leading the way, according to Grubb & Ellis Co., was downtown Los Angeles, which absorbed nearly 325,000 square feet of space as the vacancy rate fell a full point to 15 percent. A spate of high-profile deals were announced, including architecture firm Gensler relocating from Santa Monica and leasing 45,000 square feet at City National Plaza. There were law firms, too, including Haight Brown & Bonesteel LLP. (See main article page 21.)

The Tri-Cities, which had suffered from media and entertainment cutbacks, also did well, while the Westside was uneven; some submarkets performed poorly even as certain deals garnered headlines, such as Google Inc. leasing 100,000 square feet in Venice’s Binoculars Building.

But it wasn’t all about headlines. Brokers said most of the action came from smaller companies looking for 8,000 to 10,000 square feet as they gained confidence about making financial commitments and hiring employees. Some moved, but many more locked in good deals at existing offices.

“In the past, maybe two to three (deals) out for 10 would be renewals. Now it’s probably closer to seven or eight,” said Chuck Hunt, Grub & Ellis’ executive managing director for Southern California.

Landlords, aggressively competing for tenants, dropped average asking rates to $2.95 for Class A space, compared with $3.01 the previous quarter and $3.03 a year earlier. Concessions included free rent and parking, and in some cases even free after-hours air conditioning.

While it’s not time to break out the champagne, some of the typically high-performing submarkets were able to hike rents as demand for space grew. Century City posted the highest asking rates with $4.52, a 9-cent jump from the previous quarter.

The volume of transactions was, however, slightly deceiving. More than a few companies reduced space as they signed new deals.

“It’s creating better absorption, but it’s not enough to tip the meter on total vacancy,” Hunt said.

(The county’s vacancy rate fell one-tenth of a point to 16.9 percent even as 34,611 square feet returned to the market. That was due to Grubb & Ellis downsizing total inventory because a building was bought by an owner-user.)

The contractions highlight how the down economy still had a hold on many L.A. businesses. Consider New York-based Parsons Brinckerhoff. The engineering firm announced it would lease additional space downtown, but closed other offices around Los Angeles in the process.

“The (so-called) expansions are misleading,” said Hunt. “Because Parsons combined a couple of different offices outside of the downtown office, it looked like an expansion but the reality is that they took less space overall.”

The South Bay in particular was weak, giving back 387,358 square feet after a strong fourth quarter, which was spurred by a recovery in international trade. Still, while the commercial real estate recovery is uneven, there is one business that the rocky market and aggressive landlords are benefiting for sure: brokerages.

“This is an incredible time right now for me and my group,” Larsen said. “We’re saving millions of dollars on tenant portfolios here in L.A. and across the country – and it makes us look good.”