If Warner Center were a novel it would be “A Tale of Two Cities.”
Vacancies in the Valley’s bellwether submarket spiked for the second straight quarter to 8.2 percent from 7.6 percent, while year-to-date absorption was deep in the red, 100,000 square feet behind the same period last year, according to Grubb & Ellis, Co.
At the same time, the area has remained attractive to investors, who are building new projects despite soaring land costs.
“Investor confidence, not necessarily tenant demand, is driving the bullish office market,” observed Mark Leonard, senior vice president and principal, Lee & Associates in Calabasas. “The big players feel the price-per-square-foot rates are low, relative to areas like the Westside. They’re not concerned with vacancies so much, as what their product is really worth on a price-per-pound basis.”
Among the players last quarter, Cornerstone Real Estate Advisers (an affiliate of MassMutual Financial Group) gained partial approval to demolish its 66,000 square foot site at 6464 Canoga Ave. and raise a new 11-story Class A tower, with nearly triple the square footage.
The project has penciled out at least partially because MassMutual has owned the property for decades. Another avenue for investors: “creative space” options, which feature office, industrial, and parking structures all tied together.
Private equity concern Selective Real Investments, bought a 53,378-square-foot office flex parcel at 6041 Variel Ave. for roughly $12 million. The building, 100 percent leased to Neversoft Entertainment, a subsidiary of Activision Inc., features a warehouse and separate parking structure.
Gary DiMartino, a partner with Told Partners Inc. in Woodland Hills, said commercial investors continue to covet the area, despite some feeling that residential and office projects have been overbuilt in the area.
“I think investors see long term value in Warner Center, even if no one is exactly sure what type of use will ultimately prevail,” he said.
The East and Central Valley also saw bumps in their vacancy rates and negative absorption. Average Class A asking rents, which had been skyrocketing in the East Valley leveled off, down 8 cents to $3.38 from $3.46, while Central Valley rates, led by booming demand along Ventura Boulevard in Encino and Sherman Oaks, nosed up 8 cents.
MAIN EVENTS
– The General Services Administration leased 31,832 square feet of office space at 9301 Corbin Ave., Northridge, from Alliance Commercial Partners. The space, which the U.S. Census Bureau will occupy, was taken for 54 months at $2.30 full service gross, with 3 percent annual increases.
– The Pres Cos. of Newport Beach purchased Lankershim Media Center, 4640 Lankershim Blvd., North Hollywood. It paid $269 a square foot, or roughly $19.7 million for the site to seller Laeroc Partners Inc. of Hermosa Beach.
– Councilman Richard Alarcon won approval for the Community Redevelopment Agency to move forward on a multimillion-dollar revitalization effort of nearly 3,000 acres in the Northeast San Fernando Valley. The $62 million available for improvements will balance commercial, industrial and retail development, according to representatives from the Valley Economic Development Corp.
– Markel West Insurance signed on for 21,000 square feet in Douglas Emmett’s Warner Center Towers. Total value of the 10-year lease was put at roughly $6.5 million. Markel had outgrown its 15,000 square foot space in nearby Warner Gateway. Emmett’s seven buildings at Warner Center Towers total nearly 2 million square feet of space, and are the yardstick for all office leasing in Warner Center.
– The State of California, Department of Toxic Substance Control inked nearly 51,000 square feet of Class B space inside the Chatsworth Business Center at 9211 Oakdale Ave. The 10-year deal offered by Anaheim Investors LLC was for roughly $2.60 per foot, with 3 percent annual increases.
Office Market at a Glance
Inventory:
26.7 million square feet
Under Construction:
1.4 million square feet
Class A Asking Rents:
$2.70
