Pending Building Acquisitions Have Brokers Seeing Brighter Future

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The Santa Clarita Valley office market had another sluggish quarter, but some brokers see a bright future.

With two sizable deals in escrow, the market could see a lot of empty space filled up soon, leading to a sharp decline in vacancy rates. That promise of improvement is leading some brokers to shrug off the latest quarter, when just more than 10,000 square feet was put back on the market, according to figures from Jones Lang LaSalle Inc., bumping vacancies up slightly to 21.4 percent.

“We expect a few large transactions to close at the end of the year, causing vacancy rates to decrease further and paving the way for rental rate growth,” said Ryan House, a vice president at Jones Lang LaSalle.

Class A asking rents fell by one cent during the quarter to $2.42.

The activity during the July-September period was driven almost entirely by one large deal, as the Los Angeles County Department of Children and Family Services renewed a 36,161-square-foot lease for five years at the Valencia Corporate Plaza. The agency occupies two of the plaza’s three buildings, 28470 and 28490 Avenue Stanford.

Despite the light quarter, House said the market has come a long way since the end of 2009, when the vacancy rate reached 28.7 percent.

And it could be getting even better.

Kevin Fenenbock, senior vice president at Colliers International, noted that there are two buildings – totaling more than 160,000 square feet of space – that could be coming off the market soon. That would be a boon for the valley.

“I don’t think it’s going to get any worse from here,” he said. “Based on the activity that I know about, we’ll see the decrease in vacancy within the next two quarters.”

Fenenbock said a medical group is preparing to grab a vacant 117,000-square-foot office space at 26877 Tourney Road. The property, formerly owned by mining company U.S. Borax, is listed at $12 million and is represented by Cushman &Wakefield.

He also singled out another property in escrow, a vacant 44,000-square-foot space at 23823 Valencia Blvd. previously occupied by the Newhall Land and Farming Co. The deal is expected to close by the end of the year.

“There are larger spaces on the market that normally don’t compete with the rest,” Fenenbock said. “But if one disappears, you’re going to see a big reduction of vacancy – probably in the high teens or low 20s.”

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The Los Angeles County Department of Children and Family Services renewed its lease at the Valencia Corporate Plaza at 28470 and 28490 Avenue Stanford in Santa Clarita. It occupies 36,161 square feet in two of the three buildings on the property. Financial terms were not disclosed.

Creativa Associates renewed a lease at the Valencia Corporate Plaza, which is owned by Pacific Office Properties Trust Inc. The financial and insurance services company has signed for 6,843 square feet at 28470 Avenue Stanford in Santa Clarita. Financial terms were not disclosed.

Health care provider SarNova renewed its 6,500-square-foot lease at the Valencia Executive Plaza at 27201 Tourney Road in Valencia. Financial terms were not disclosed, but the average rent in the building is $1.50 per square foot per month.

Archon Group LP acquired the Hilton Garden Inn Valencia Six Flags, located at 27710 The Old Road. LVS Hospitality LLC paid $14 million for the hotel in late August. Archon bought the property just a year and three months ago. The two-story hotel, built in 1991 and renovated in 2001, has 152 rooms and a 2,500-square-foot banquet space.

The former U.S. Borax property located at 26877 Tourney Road is now in escrow. The approximately 117,000-square-foot space is listed at $12 million and is expected to be sold by the end of the year to an undisclosed medical group.

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