The office vacancy rate in Los Angeles County has dropped to its lowest level since 2001, according to a new report from real estate brokerage Cushman & Wakefield. The county posted a 15.5% vacancy rate in the third quarter of 2004, down 4% from a year earlier.

The decline is due largely to 678,000 sq. ft. of absorption — roughly one-third of LA County’s 2 million sq. ft. of absorption — in the Westside submarket during the third quarter.

"This is an extremely positive sign as it is apparent that business owners are taking more space in anticipation of a stronger economy," says Joe Vargas, senior managing director at Cushman & Wakefield.

The submarket’s stellar absorption record is surprising, adds Erick Olofson, executive director of the firm’s West Los Angeles office. Nearly 1 million sq. ft. of new office space was built and delivered to the market during the third quarter, yet its vacancy rate dropped to 14.9% from 17.3%. Vacancy rates in downtown LA also declined from 19.6% to 17.2% year-over-year.

The South Bay district is the only submarket still exhibiting weakness, according to Cushman & Wakefield. Vacancy rates in South Bay were hovering at 19% at the end of the third quarter. But there is light at the end of the tunnel: leasing activity in Long Beach — where vacancy dropped from 12.1% in the third quarter of 2003 to 10.6% this year — will buoy the nearby South Bay area, reports Cushman & Wakefield.