SANTA CLARITA: Commercial Vacancy Rates Double Year to Year

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Commuters stuck in rush-hour traffic on the Golden State (5) Freeway leaving Santa Clarita for the San Fernando Valley may likely ask: “What mortgage crisis?”

But those with a reverse commute can attest to the softness of the Valencia office market, with or without the subprime meltdown.

Commercial vacancy rates in Santa Clarita have more than doubled to 16.3 percent from 7.6 percent in the first quarter of 2007, according to Grubb & Ellis Co. For a market that has traditionally absorbed up to 200,000 square feet per year for much of the last decade, the 42,135 square feet of space chucked back in the first quarter was not an encouraging sign.

“Santa Clarita is a victim of its own success,” observed David Solomon, senior vice president for CB Richard Ellis in Universal City. “Historically, the region’s been popular with commercial developers, and now it’s a situation where new product is coming on line at a time when demand has curtailed. We’re not seeing absorption that’s consistent with the past.”

With an additional 250,000 square feet of Class A space entering Valencia’s small 2.5-million-square-foot base before the end of the year, market watchers said the area’s vacancies may well surpass 20 percent.

Landlords will become more aggressive with numbers like that, but they’re unlikely to substantially move off current rates. First quarter Class A rentals in Valencia checked in at $2.90 per foot, one cent lower than the previous quarter and 12 cents higher than the same period last year.

Without much action in the office sector, it was left to industrial traders to supply momentum. Among the deals, plumbing parts manufacturer King Bros. Industries exercised a lease-purchase option on a 75,055-square-foot building at Commerce Point, 29101 The Old Road. L.A.-based Marcus Adams Properties LLC sold the five-year-old Class A site for nearly $6.7 million.



Office Market At a Glance

Inventory: 2.47 million square feet

Under Construction: 374,536 square feet

Class A Asking Rents: $2.90



MAIN EVENTS

– Wyndham Resorts Development Corp. signed on for 8,269 square feet at the Commons, 25124 Springfield Court, Valencia. The lease with Cornerstone Advisors came in just shy of $3 per foot, and includes building top signage and a tenant improvement allowance for around $40 per foot. The leisure firm sells vacation home timeshares and will target the region’s residential base.

– Longtime Valencia manufacturing firm King Bros. Industries exercised an option to buy on its rental deal at 29101 The Old Road. The firm, which makes plastic valves and fittings for the landscape irrigation and plumbing industries, paid nearly $6.7 million for the 75,055-square-foot property inside Commerce Point. The seller was Los Angeles investment firm Marcus Adams Properties LLC.

– Shield California Health Care locked in 96,695 square feet for 10 years at 27911 W. Franklin Parkway, Valencia. Terms for the industrial space from building owner TMC Franklin began at 53 cents, with a three-cent bump after two years.

– The future of one of Valencia’s biggest users of commercial space, MannKind Corp., was put in doubt when pharmaceutical giant Pfizer Inc. revealed its inhalable insulin product, Exubera, may increase the risk of lung cancer. Alfred Mann, founder and chief executive of MannKind, said he’s intent on moving forward with his own brand of inhaled insulin, Technosphere. But the survival of MannKind, whose Santa Clarita campus is more than a half-million square feet, is a question mark beyond 2009, according to health sector analysts. The company’s stock trades at a fraction of its former value.

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