If the fourth quarter was a step forward for the San Fernando Valley’s office market, then this year’s first quarter was surely one step back.

The net absorption rate plummeted during the beginning of the year, with the market giving back 134,921 square feet, close to the same amount of space it absorbed during the prior quarter, according to Grubb & Ellis Co. In turn, vacancies rose a half-point to 18.5 after falling by a half-point at the end of last year.

In other words, the market is almost back where it started.

“It’s going to be a real gradual recovery,” said Jay Rubin, principal, Lee & Associates. “There are positive indicators out there, but nothing drastic is happening. And I don’t think anything drastic is going to happen.”

Nearly every Valley submarket saw vacancy increases, but none as big as the Conejo Valley’s jump of more than 1 point to 18.6 percent. Though certain cities within the long, narrow submarket along the Ventura (134) Freeway have remained relatively tight throughout the downturn, such as Calabasas, others, such as Agoura Hills, have struggled.

Despite the fact the West Valley was the only submarket to absorb space – 8,724 square feet – it still had the market’s highest vacancy rate, 23.5 percent. Meanwhile, the central Valley submarket, which includes Encino and Sherman Oaks, kept its offices fuller than its counterparts, with a vacancy rate of 13.3 percent, thanks in part to close proximity to the San Diego (405) and Ventura (101) freeways interchange.

“A lot of companies in the central Valley have taken advantage of not having to pay Westside rents (while) being able to accommodate Westside clients as well as Valley clients,” Rubin said.

Class A asking rents fell 4 cents marketwide to $2.30 as landlords fought to keep existing tenants and lure new ones. Class B rates increased 7 cents to $2.20.

There was some good news. Since the real estate market soured a few years ago, most of the Valley’s minimal sale activity has been limited to owner-users. But an uptick in investor interest over the last few quarters looks like it’s finally turning into more. Case in point, real estate investment firm Rexford Industrial recently dove in and purchased a 77,892-square-foot San Fernando industrial building for $3.38 million.

“We’re seeing quite a bit more activity on the investment side,” said Rubin. “They’re starting to get back into the market.”

MAIN EVENTS

• SL West Hills IMRT LLC inked a 10-year lease with landlord L. Aronoff & Sons to take 12,200 square feet at 21300 Erwin St. at Warner Center in a deal valued in excess of $2.7 million. The company plans to convert the space into an intensive modulated radiation therapy facility. The therapy is a relatively new process that lets technicians change the intensity of the radiation and spare more of the adjoining tissue during cancer treatment.
• Blackline Systems Inc., a Calabasas financial software firm, is moving its headquarters to the Warner Center commercial office district in Woodlands Hills. The company was lured in part by the city of L.A.’s new business-tax holiday program, which grants a three-year exemption from business taxes to companies that move into the city.
• Real estate investment firm Rexford Industrial purchased a 77,892-square-foot building in San Fernando from Samco Scientific LLC for $3.38 million. The single-story building is at 1050 Arroyo Ave.
• Spectrum Investment Corp. sold a Van Nuys retail property at 5651 Sepulveda Blvd. for $3.1 million to Osteon Enterprises LLC. The buyer said it plans to convert the 8,350-square-foot building to medical offices by the end of 2011.