Major Events:
– Moulton Logistics Management signed a five-year, $3.8-million lease with AMB Property for 108,000 square feet in the Van Nuys Airport Business Park.
– The law firm of Korenberg, Abramowitz & Feldun signed a 10-year, $3.1 million lease for 12,000 square feet of office space at Washington Mutual Plaza, 13949 Ventura Blvd. in Sherman Oaks.
– Western General Insurance Co. signed a nine-year, $10.2 million sublease for 40,174 square feet of office space at 5230 Las Virgenes Road in Calabasas.
The San Fernando Valley market showed pockets of stability in the third quarter, although the overall showing was weak some of it the result of post-Sept. 11 jitters.
Not only did vacancy rates rise, market experts said deals that might have otherwise happened during the period got postponed or outright canceled as some companies rethought any expansion or relocation plans.
“Prior to Sept. 11, we were headed into a sluggish market at best,” said Matt Hargrove, senior director at Cushman & Wakefield of California Inc. “Since 9/11, a number of large companies in the San Fernando Valley are now preoccupied with mundane security issues rather than real estate expansion.”
The overall office vacancy rate for the region jumped to 12.8 percent from 11.6 percent in the previous quarter, according to Grubb & Ellis Co., and was well above the 10.9 percent in the like period a year ago.
Buttressing this, average office rents in the Valley fell to $2.33 a square foot in the third quarter, from $2.36 in the second quarter, though it is still well above the $2.11 a square foot of a year ago. And net absorption was a negative 101,087 square feet, a reversal of the positive absorption of 426,015 square feet three months ago.
Meanwhile, in the industrial market, rates for North Los Angeles (which includes parts of Ventura County) rose to 5.7 percent from 5.2 percent in the second quarter of the year, and well up from 4.9 percent in the same period of 2000.
Some brokers stressed that while the Valley economy remains relatively strong, what deals went through tended to be small.
“All things considered, (vacancy rates) aren’t too bad,” said Jim Linn, Grubb & Ellis senior vice-president in the North L.A. industrial division. He said that year-on-year, the Valley’s industrial sector in the third quarter saw “about a 300,000-square-feet decline out of a total of 100 million square feet. That’s not all that much. We’ve seen more smaller to medium-sized transactions than (those) in larger buildings.”
Linn said the industrial market wasn’t as affected as the office market seemed to be in the wake of the terrorist attacks. “I don’t think it stopped transactions from happening, but it may have affected the price,” he said.
But other brokers said movie studios, a number of which are in the eastern part of the Valley, had put off deals to concentrate on shoring up their security.
“Everything seemed to be picking up until Sept. 11, actually,” said Brian Hennessey, vice president of office services at Grubb & Ellis. “After that, it seemed to put a major wrench on deals.”
Activity that did take place seemed to be concentrated in the central and western part of the Valley, in areas like Woodland Hills, Calabasas, Chatsworth, Northridge and Granada Hills.
That didn’t stop the West Valley’s vacancy rate from rising to 12.6 percent in the third quarter from 11.3 percent in the second, while rates dropped to $2.49 a square foot from $2.51. In the East Valley, which includes Studio City, North Hollywood, Panorama City and Sun Valley, the vacancy rate shot up to 13.4 percent from 10.9 percent, as rates rose to $2.63 a square foot from $2.61.
On the other hand, the so-called 101 Tech Corridor, heading all the way past Calabasas, seemed to be relatively busy. The vacancy rate for office space in the Santa Clarita Valley dropped to 23.6 percent from 29.0 percent in the second quarter, and well down from 33.2 percent a year ago. This is in part due to the lack of new construction in the region, which itself is likely to continue until signs of recovery are stronger.
“Everybody is in a wait-and-see mode,” Hargrove said. “It’s psychological. The psyche of the whole country has been affected. It’s going to take a little bit of time to turn things around.”
“There has been downsizing and consolidation,” Hennessey said. “But the other aspect we’re seeing is that there has been a lot of subleasing in the market.
