SAN FERNANDO VALLEY: Free Fall Slows as Tenants Land Deals

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Though the San Fernando Valley office market’s free fall slowed in the second quarter, the vacancy rate inched up one-tenth of a point to 19 percent, while the market gave back 28,000 square feet.

That’s not so good in normal markets but huge improvements from the first quarter, according to Grubb & Ellis Co.

Still brokers aren’t rejoicing.

“Nothing has happened,” said Robert Chavez, chief executive of Guardian Commercial Realty, a Westwood brokerage with a Valley office. “Some landlords try to pretend that things are shifting in their direction, but I don’t see it happening.”

What is happening is a lot of moving around after consolidations. For example, Protocol Professional Staffing combined operations in Westlake Village and Encino to a building owned by Mid Valley Properties in Calabasas. The incentive was a long-term lease at a better building for about the same rate.

But it’s a tricky proposition for landlords who on average were asking $2.42 per square foot, or a penny less, for Class A office space.

“There’s a pretty active market of tenants looking for space, but it’s downwardly mobile,” said Jim Conner, vice president of Daum Commercial Real Estate in Woodland Hills. “The biggest challenge owners of commercial properties face is trying to avoid having existing tenants renegotiate midterm leases. That’s because they are forced to offer rent concessions to new tenants.”

As usual, the market remained highly segmented, with the West Valley still suffering from the closure of businesses that flourished during the housing boom. The vacancy rate dropped less than a half-point to 24.2 percent.

Office Market At a Glance

Inventory: 28.5 million square feet

Under Construction: 0

Class A Asking Rents: $2.42

MAIN EVENTS

  • Regency Theaters, previously located on Mulholland Highway in Calabasas, moved its corporate headquarters to Calabasas Point, a 59,300-square-foot office building at 26901 Agoura Road. The theater company signed a long-term lease but details were not disclosed.
  • Harbor Freight Tools, a discount tool chain based in Camarillo, leased 90,000 square feet of office space from Kilroy Realty Corp. at 26541 Agoura Road in Calabasas. The company will retain its Ventura County headquarters. Details on the long-term lease were unavailable.
  • About 178,000 square feet of office space at 30930 and 30870 Russell Ranch Road in Westlake Village was taken off the sublease market by Bank of America. The space, in two buildings owned by a partnership of IDS Real Estate and pension trust MEPT, was acquired by Bank of America when it purchased Countrywide Financial in 2008. The bank has an 11-year lease worth about $60 million.
  • Regency Lighting, a wholesale lighting distributor based in Van Nuys, consolidated operations in May from three locations into a 47,500-square-foot building at 9261 Jordan Ave. in Chatsworth. The company recently purchased the building for $5.7 million, or $120 per square foot.
  • A 1.24-acre parcel of land at 14649 Lanark St. in Panorama City was sold for $3.5 million by owner Gary D. Solazzo to the Los Angeles Unified School District, which plans a school. Solazzo had housed his business Sola Security of Los Angeles Inc. in an 11,822-square-foot building on the property, while two smaller buildings were leased.

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