Major events in Los Angeles County commercial and industrial submarkets in the third quarter.
The Santa Clarita Valley is breathing a sigh of relief this quarter. The office market stayed steady despite vacancies created by two large residential real estate companies.
The vacancy rate dipped to 24.5 percent in the third quarter, down from 25.1 percent last quarter, according to Grubb & Ellis Co. Vacancies are still more than 4 percent higher than they were a year ago, but with asking rents static at $2.55 per square foot, brokers don’t expect things to get worse.
“I’m optimistic that we’re not going to see the vacancy rate increase anymore,” said Ryan House, vice president at Jones Lang LaSalle. “If anything, it will stay stable and hopefully decrease over the next 12 to 18 months.”
Santa Clarita has been hit hard by the loss of real estate companies that traditionally dominate the market. Both KB Homes and Centex Homes ended leases on large offices. KB Homes downgraded to a 2,000-square-foot space and Centex Homes left the market.
These vacancies have opened up space for small businesses looking for short-term, bargain-basement leases. Kevin Fenenbock, a senior vice president at Colliers International, said he expects landlords will take what they can get during the next year as they wait for the market to improve.
“They’re trying to generate cash flow right now,” he said. “If they can get someone to fill a space for the next year or two years, even if it’s at a low rent, they’re OK doing that.”
But Fenenbock acknowledged that more activity doesn’t mean the market will automatically improve. Many businesses are moving in order to consolidate or take advantage of lower asking rents.
“It’s a musical chairs kind of thing,” he said. “What I’m seeing out there is a lot of people moving around. There’s no net absorption going on.”
Office Market At a Glance
Inventory: 2.76 million square feet
Under Construction: 99,000 square feet
Class A Asking Rents: $2.55
- A 4,000-square-foot office at 28470 Avenue Stanford in Valencia was leased to Pasadena-based Community Bank for five years by landlord American Assets. The space was previously occupied by two smaller tenants. Community is moving its local office from 28494 Westinghouse Place.
- American Independent Mortgage signed a five-year lease for an office at the Highridge Business Center. The 2,500-square-foot space is on the first floor of 27955 Smyth Drive in Valencia. It was leased for $1.08 per square foot.
- Centex Homes, recently acquired by builder PulteGroup Inc. of Bloomfield Hills, Mich., vacated a 30,000-square-foot office at 27200 Tourney Road in Valencia at the end of July. The space has been divided to make room for smaller tenants looking for short-term leases, but most remains vacant.
- A 3,900-square-foot office at the Valencia Corporate Center was leased to a website design company. Scorpion Design, which specializes in websites for law firms, signed a six-year lease at 28480 Avenue Stanford at $2.75 per square foot. The lease will become effective in January next year.
- The Law Offices of David Barlavi leased a 700-square-foot office in the Paragon Business Center at 25060 W. Avenue Stanford. Barlavi, a tax and estate law attorney, leased the office in July for three years at $1.43 per square foot. The 23-year-old building is undergoing lobby renovations.
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