The Santa Clarita Valley office market has the most vacancies of any submarket in Los Angeles County. But last quarter it could have been a lot worse.
The rate inched up only one-tenth of a point to 22.3 percent and that’s despite the bankruptcy filing of LandSource, a joint venture that owns Valencia-based Newhall Land & Farming Co., the area’s biggest residential developer.
Ryan House, vice president at Jones Lang LaSalle Inc., said the effect has been muted because Newhall has largely focused on residential.
“They’re a different king of animal,” he said.
But there are big problems on the horizon. Brokers are bracing for a tsunami of new office buildings planned long before the current bust. Summit Oaks, a 144,000-square-foot Valencia development, finished construction but has no tenants, said David Solomon, a leasing agent at CB Richard Ellis Group.
And one of the two 100,000-square-foot office properties that are part of the Entrada Gateway project on Magic Mountain Parkway is set to come on line but has no tenants either.
In total, Santa Clarita has almost 350,000 square feet under construction, more than the entire San Fernando Valley, a submarket 10 times the size of Santa Clarita.
“There haven’t been any significant lease transactions of more than 10,000 square feet,” in the third quarter, said House. “There’s new construction coming on line, but a softening of the economy, and a softening of the residential and mortgage markets have contributed to a lack of new absorption.”
Average asking rents for the quarter were $2.80 per square foot, down from $2.85 a year ago. That also could have been worse.
“I would expect asking rates to remain relatively stable as the majority of the vacancy is confined to newer, nicer projects which have asking rates commensurate with their development costs and building quality,” Solomon said.
MAIN EVENTS
– Parker Properties and RREEF Alternative Investments have completed construction of Summit Oaks, a five-story, 144,000-square-foot office building. The property, at 28515 Westinghouse Place in Valencia, is adjacent to an Embassy Suites and Courtyard by Marriott. Despite Class A amenities and good visibility from the Golden State (5) Freeway, the project has no tenants.
– Multi-State Insurance Services, previously located in Glendale, leased 10,000 square feet at Tourney Place, an office complex at 27451 Tourney Road in Valencia. Multi-State is an underwriter in auto and property coverage. Tourney Place is owned by Sapra I LLC.
– Reape Rickett Law Firm leased 6,500 square feet at the Commons at Valencia Gateway. The three-story office building, owned by Opus West Corp. of Phoenix, is across from College of the Canyons on Valencia Boulevard.
– MZI Healthcare LLC expanded operations by leasing 6,000 square feet at 28480 Avenue Stanford in Santa Clarita. The company, which makes software for managing employee health benefits, cut a five-year deal at $2.70 per square foot. It will move from smaller offices just down the street at 25060 Avenue Stanford.
– Dallas-based LNR Property Corp. started preleasing LNR Entrada Gateway Center, a pair of four-story, 100,000 square-foot office buildings near Magic Mountain Parkway.
Office Market At a Glance
Inventory: 2.64 million square feet
Under Construction: 349,000 square feet
Class A Asking Rents: $2.80
