REAL ESTATE QUARTERLY - North County & Ventura County
Vacancy Rates Still Low as Market Continues to Tighten
By NICOLE TAYLOR
The office and industrial markets in North Los Angeles County tightened in the second quarter, with vacancy rates in the single digits for both.
Office vacancies in the Santa Clarita Valley stood at 9.3 percent for the three months ended June 30, compared with 10.4 percent in the previous three months and 16 percent a year ago. Net absorption remained positive at 17,462 square feet, according to Grubb & Ellis Co.
Despite a drop in industrial sales and leasing activity from the previous three months, the vacancy rate declined half a point to 8.4 percent from the first quarter and is down 3.5 percent from the year-earlier period.
Leasing rates in the office sector responded to the tightening market, with Class-A office rents up 19 cents from the first quarter at $1.98 per square foot. The average asking rate for industrial space was 53 cents, a one-cent increase from the previous three months.
"We've seen growth from within and continue to see new tenants set up offices in the Valencia market," said David Solomon, vice president at CB Richard Ellis. "As the critical mass gets bigger, the growth from within improves exponentially."
Solomon also noted the movement of established companies into more traditional office space where they had previously occupied industrial space as fueling growth in the area.
Of the office deals, the Westridge Executive Plaza saw roughly 10,000 square feet of leasing activity from three deals in the quarter. The largest came from Valencia-based law firm Hacker Kanowsky & Braly, which leased 5,368 square feet in the business park for five years.
In the Summit at Valencia, the State of California's Department of Consumer Affairs leased approximately 3,000 square feet for eight years and Ameriquest Mortgage Co. leased 2,856 square feet for five years. Both were for around $2 per square foot, according to Solomon.
Valencia Corporate Center saw the most activity in terms of square footage, with two deals inked in Tourney Place, a 42,760-square-foot project in the business park slated for completion in September. Calvin Hedman & Associates leased 7,500 square feet for 10 years and Bank of Santa Clarita signed a five-year lease for the same square footage.
Also in Valencia Corporate Center, Tourney Professional Partners purchased 2.3 acres, with plans to construct a 35,000 square foot medical office building.
Brokers expect vacancy rates to continue their downward trend, with projects under construction for next year likely to achieve significant levels of pre-leasing.
"Those buildings will be easily absorbed without hurting vacancy," said Jim Lindvall, senior vice president at Grubb & Ellis.
Sales and leasing activity in the Santa Clarita Valley industrial market slowed in the second quarter, with 248,730 square feet in sales and leases compared with 419,654 square feet in the January-March period and 621,714 in the year-earlier period.
"There's been an increase in leasing activity, even though it's not that visible from the activity reported," said Jim Linn, senior vice president at Grubb & Ellis. "Almost every building over 100,000 square feet has an offer pending."
Leasing accounted for more than two-thirds of the square footage, with most of the activity occurring in the Valencia Commerce Center.
The biggest deal came from exercise equipment company Precor Inc., which leased 101,255 square feet in the business park for five years (including options), according to Ross Thomas, chief executive of Delphi Business Properties Inc. Precor, a subsidiary of Helsinki-based sporting goods maker Amer Group PLC, recently acquired Fitness Products International and will move FPI's operations next month from Sun Valley in order to expand production and sales.
Also in the Valencia Commerce Center, Deluxe Media Services signed a short-term lease for 33,017 square feet in a building near the location of the 175,897 square feet of space it already holds in the business park.
Among sales transactions, Commerce Pointe saw two notable deals. Jonathan and Meri Ekizian purchased an 18,070-square-foot building and J. Levi acquired the 20,653-square-foot building next door. Both sales were in excess of $100 per square foot, said Doug Sonderegger, executive vice president at CB Richard Ellis., who co-represented the seller, CPT/SC Title Holding Corp., in both deals.
Valencia-based Mechanix Wear purchased a 4.1-acre parcel in the Valencia Commerce Center for $2.2 million in order to build a 74,500-square-foot headquarters and distribution facility. The glove manufacturer is relocating from the Valencia Industrial Center.
Confirming the need for more industrial space, construction jumped to 756,316 square feet compared to less than 85,000 square feet in the previous quarter.
Construction began on the third phase of Commerce Pointe, with nine buildings totaling just under 200,000 square feet in progress. Developer PacTen Partners anticipates completion in December, with negotiations happening in several of the buildings, according to Sonderegger.
- Precor Inc. leased 101,255 square feet in the Valencia Commerce Center for five years.
- In Commerce Pointe, Jonathan and Meri Ekizian purchased an 18,070-square-foot building and J. Levi acquired the 20,653-square-foot building next door.
- Mechanix Wear purchased a 4.1-acre parcel in the Valencia Commerce Center for $2.2 million.
- Deluxe Media Services leased 33,017 square feet at Valencia Commerce Center.
- Calvin Hedman & Associates leased 7,500 square feet for 10 years and Bank of Santa Clarita signed a five-year lease, also at Tourney Place in the Valencia Corporate Center.
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