VENTURA COUNTY—Market Chill Deepens as Sept. 11 Attacks Halt Deals

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Major Events:

-J.D. Power and Associates signed a 5-year, $21 million lease for 93,000 square feet at 2625 Townsgate Road in Westlake Village.

-California’s industrial relations and consumer affairs departments signed 8-year leases for a combined 23,900 square feet at 2220 East Gonzalez Road in Oxnard for $4.3 million.

-American Recovery Services Inc. committed $1.9 million over five years for 15,000 square feet of space at 555 St. Charles Drive in Thousand Oaks.

Ventura County’s commercial real estate market took a hit in the third quarter, as businesses halted expansions and relocations following the Sept. 11 terrorist attacks.

Brokers said they don’t anticipate an upswing in the market until the third or fourth quarter of 2002.

The chill has been particularly profound in the office sector. Back in March, there were 46 companies looking for a combined 1.5 million square feet of space. As of last week, 32 of those companies had put their plans on indefinite hold.

As a result, the office vacancy rate, rather than declining as anticipated, actually inched upward to 12 percent in the third quarter, up from 11.3 percent in the previous quarter, according to CB Richard Ellis.

“I think the economy before Sept. 11 really rattled a lot of people’s cages, but Sept. 11 didn’t help at all,” said Tom Dwyer, a senior associate at CB Richard Ellis. “Things are going to pick up, but it’s going to take some time.”

While the third-quarter action was far less than expected, office tenants did absorb 128,422 net square feet in the period, up from 99,401 square feet in the previous quarter.

The vacancy rate rose because 200,000 square feet of newly constructed office space came on line, up from 90,000 square feet during the like period a year earlier.

Much of the new space now coming on the market was undertaken when market conditions were vastly different. An example: the two 100,000-square-foot buildings at 2380 and 2400 Conejo Spectrum Drive in Newbury Park that were to become the new corporate headquarters for Xircom Inc. The mobile communications company inked a $24 million, 10-year lease for those buildings in April 2000, only to be purchased a year later by Intel Corp., which has no use for the space.

Cushman & Wakefield is now trying to find a sublessor for the Investment Development Services Inc.-owned buildings, which were completed in August.

The only major office transaction to be completed in Ventura County during the third quarter was an eight-year, $21 million lease signed by J.D. Power and Associates. That deal involves 93,000 square feet of space owned by Pacifica Real Estate Group at 2625 Townsgate Road in Westlake Village.

The deal accounted for the bulk of the 150,796 square feet absorbed in the East County submarket. The West County suffered a negative net absorption of 22,374 square feet.

The state’s Industrial Relations and Consumer Affairs departments leased 23,900 square feet at 2220 E. Gonzalez Road in Oxnard, in an eight-year, $4.3 million deal with Silagi Development & Management.

American Recovery Services Inc. leased 15,000 square feet at 555 St. Charles Drive in Thousand Oaks from Arden Realty Inc. for $1.9 million over five years. The landlord and tenant were represented by CB Richard Ellis and Cresa Partners, respectively.

Brokers attributed the overall dearth of deals in the quarter to landlords holding the line on monthly rents $2.25 to $2.75 per square foot in the East County, and $1.80 to $1.90 in the West County.

“The landlords are still trying to hold to the rent they want to achieve,” said Carlo Brignardello, a vice president at Cresa. “But if current market conditions and the lack of activity remains, they might be under a little more pressure to lower their rates and become more aggressive.”

Ventura County’s industrial landlords have been just as stubborn, holding firm on monthly rents of 65 to 80 cents per square foot in East County and 45 to 60 cents in the West County.

But they may not be able to hold the line much longer, considering the county’s overall industrial vacancy rate jumped to 8.1 percent from 6.4 percent in the previous quarter, due largely to the effects of a downturn in the fashion industry.

Bugle Boy Industries Inc., which went bankrupt earlier this year, has vacated its 237,000-square-foot distribution building at 355 Easy Street in Simi Valley. CB Richard Ellis is seeking a 10-year lease for more than $14 million on behalf of building owner Triliad Development Inc.

The Gap Inc. closed its 240,600-square-foot distribution center at 5198 Colt St. in Ventura to consolidate operations in Fresno. Daum Commercial Real Estate Services is trying to sell the building and 4.1 acres of land for $12.3 million.

“I don’t see it as something that’s really going to hurt our market,” said Mitchell Conlee, Daum’s first vice president of industrial properties. “For the city of Ventura, there really isn’t anything else competing with us. There is a high probability that we will sell it in the near future.”

Meanwhile, the countywide vacancy rate for retail space increased to 7.4 percent in the third quarter, up from 5.6 percent.

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