Companies continued to leave the San Fernando Valley for the planned pastures of the Santa Clarita Valley, keeping demand for industrial space brisk in Valencia.
Office vacancy rates in the Santa Clarita Valley rose to 29.1 percent in the first quarter of 1999 from 28.6 percent in the last quarter of 1998, and industrial vacancy rates stayed flat at 7.1 percent, according to Cushman & Wakefield Inc. But brokers say the increase in vacancies reflected the pace of construction rather than any letup in interest in the market.
In Valencia, the amount of absorbed space at the city's two industrial parks, the Valencia Industrial Center and the Valencia Commerce Center, reached about 1.12 million square feet between January and the end of March, after finishing at 1.54 million square feet for all of 1998. Brokers expect that more than 2 million square feet will be newly occupied by the end of the year, with construction barely keeping up with demand.
"Demand is at its highest level ever," said Craig Peters, senior vice president at CB Richard Ellis Inc. He says 1.36 million square feet are under construction at the two industrial parks, and all but 253,000 square feet have already been pre-leased. "That's only eight months of space (left to lease)," he said. "That's an exceptionally low supply."
Among the deals that took place in the first quarter, Pharmavite Corp. leased 740,000 square feet in four buildings at the Commerce Center for more than $50 million over 10 years. The fast-growing company, which manufactures nutritional supplements, will relocate 1,200 employees from the San Fernando Valley.
APW Enclosure Products, formerly Zero Stantron, leased 170,000 square feet in the Commerce Center and will be moving its headquarters from Pacoima. Chocolates A la Carte, a specialty dessert maker, leased 110,00 square feet in the same venue, transferring its operations from Sylmar, while Day Pro Rubber leased 34,000 square feet in the Commerce Center.
In addition, Bertelsmann Industries Services, part of the German media conglomerate Bertelsmann AG, leased 105,000 square feet in the same business park.
Brokers say a large number of companies are moving north to embrace the economies of the planned communities in the Santa Clarita Valley, where the offices are newer and better suited for the multimedia age than in the San Fernando Valley.
"Quality-of-life issues are more and more important to companies these days," said CB Richard Ellis' Peters.
And with the L.A. County Board of Supervisors having given final approval for the Newhall Ranch planned community, demand for space in the area is likely to continue.
"Things are looking very strong," said Marlee Lauffer, a spokeswoman for Newhall Land and Farming Co., which is developing the 21,000-home project.
She said Newhall Land is in the process of selling a $31.8 million, 32-acre site next to Valencia Town Center, on which 900 apartment units will be built. She would not disclose the buyer and developer of the site.
In addition, she said an 11-screen Edwards Theatres multiplex, plus a 3-D Imax theater, will open on Town Center Drive in Valencia next quarter.
While office space in Valencia and Newhall has remained stagnant, with a vacancy rate of about 35 percent, brokers said most of the empty space is in a single newly built office building in Valencia. The average office rental rate dropped to $1.89 a square foot per month from $1.93 three months ago, according to Cushman & Wakefield Inc.
In Lancaster, three or four proposed office projects are under consideration, said Vern Lawson, managing director of marketing and economic development for the city. One 15-acre site is in escrow, while the others are being discussed by the City Council.
"The market is about to break wide open," Lawson said. "As the San Fernando Valley and Valencia markets heat up, so does ours."
Although no big deals in the area were signed in the first quarter of the year, Rite-Aid's 1 million-square-foot distribution center is still on track to open in September, while a 22-screen Cinemark theatre is scheduled to open in May, to coincide with the new "Star Wars" film.
? Pharmavite Corp., leased 740,000 square at the Valencia Commerce Center for more than $50 million.
? APW Enclosure Products, formerly Zero Stantron, leased 170,000 square feet in the Commerce Center.
? Chocolates A la Carte, leased 110,00 square feet in the same venue.
? Day Pro Rubber bought 34,000 square feet in the Commerce Center for $2.6 million.
? Bertelsmann Industries Services leased 105,000 square feet for $4.75 million.
? Newhall Land and Farming Co. entered escrow on a $31.8 million, 32-acre apartment site it is selling next to Valencia Town Center.
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