San Fernando Valley office leasing activity slowed considerably in the second quarter, as cash-strapped Internet companies pulled back or out of the market, and the onset of summer’s seasonal slowdown kept other businesses from completing expansion/relocation deals.

The slowdown in leasing, combined with new office space coming onto the market, caused the office vacancy rate to rise in the San Fernando Valley from 10 percent in the first quarter to 11.7 percent in the second quarter.

While the economy and market continue to be strong, brokers said, short-term fluctuations are increasing. The slight uptick in second-quarter vacancy will be followed by a tightening by the end of the third quarter, they predicted, pointing out that a number of large tenants now looking for space are likely to close deals by quarter’s end.

“The pause has to do with seasonal (fluctuations) and the tech sector going through its changes,” said Brian Hennessey, a vice president at Grubb & Ellis Co. “But there are still good tenants out there looking, and all indications are that there will be good activity (again soon).”

Another indication that the market remains strong is that rental rates have remained stable or have risen, even after about a year of increases, brokers said. Rental rates for class-A office space throughout the Valley averaged $2.10 per square foot for the second quarter, compared to $2.07 for the first quarter, according to Grubb & Ellis.

In the Conejo Valley submarket, the average monthly office lease rate rose to $2.25 a foot in the second quarter from $2.03 in the first quarter. Brokers attributed that rise to the addition of newly built properties that have begun leasing.

High rents have made tenants cautious and they are not jumping into deals quickly.

“It’s definitely not like the 1980s, when tenants were leaping in because whatever they paid today would go up,” said Mike Toth, a commercial developer with Toth Properties.

The vacancy rate in the Central Valley submarket rose to 11.5 percent for the second quarter, up from 9.4 percent for the first quarter. The increase was due to new space that became available as a result of the renovation of the Sherman Oaks Galleria. The additional space resulted in a negative net absorption of 68,638 square feet for the submarket during the quarter, meaning that much more space came onto the market than was newly occupied during the period.

Newly completed office space was also responsible for vacancy rates rising in the West Valley. The submarket saw its overall vacancy rate climb to 10.5 percent from 9.6 percent in the first quarter, with negative net absorption of nearly 90,000 square feet because of the completion of the 21st Century Tower in Warner Center. The insurance company for which the building is named is leasing the majority of the building but plans to sublease about 90,000 square feet, and that space just hit the market.

“In Woodland Hills, although there’s a negative absorption because a bunch of space came on line, there was pretty good positive absorption (if the new space were excluded),” said Tom Specker, senior managing director with Charles Dunn Co. Inc. “In the five (Warner Center) plaza buildings, they had 35,000 square feet of absorption, which isn’t bad. But they’re all small deals or existing tenants taking 5,000 or 10,000 square feet of additional space.”

In the Conejo Valley, vacancy rates rose to 8.2 percent in the second quarter from 6.3 percent in the first quarter. As in other parts of the San Fernando Valley, however, the increase is attributed to new space coming on line rather than tenants moving away or downsizing. The Conejo Valley, which has had especially strong leasing activity for several quarters, experienced a net absorption of 31,388 square feet for the second quarter.

The East Valley was the only submarket to see its office vacancy rate fall. It dropped to 7.7 percent from 10.1 percent in the first quarter, and the area saw positive net absorption of more than 64,000 square feet.

Brokers said that the many small tenants leasing spaces of 10,000 to 20,000 square feet are slowly absorbing space, but not enough to offset the new space coming on line. As a result, vacancy rates in several submarkets are rising, but vacancies will start coming back down soon, as that new space is absorbed, brokers said.

“No one’s sitting still, but it’s not like space is being absorbed in leaps and bounds,” said Duane Cody, associate director of Cushman & Wakefield Inc. “It’s a gradual eroding. You don’t get much of a change when you don’t have a lot of space to absorb.”

Brokers point out that, despite the vacancy rate increase, the inventory of available space remains relatively small, and quarterly fluctuations often are not the best indicators of long-term trends.

Brokers conceded that many of the Internet startups that had contributed to a high volume of leasing activity earlier in the year have pulled out of the market or reduced their requirements. Still, brokers believe the dot-com pullback bodes well in the long term because the new conservatism will keep more sublet space from coming into the market.