For almost any other office submarket in Los Angeles County, a 32 percent vacancy rate would be an embarrassment, but in the Santa Clarita Valley, it's a marked improvement from the second quarter, when the area carried a 38 percent office vacancy rate.
"What is going on up there is you have a market that had several projects come on line at the same time," said Jim Lindvall, senior vice president with Grubb & Ellis Co.
Actually, it has been more than a year since three major projects opened in Santa Clarita the 177,000-square-foot Valencia Corporate Point, the 216,000-square-foot Tourney Point in the Valencia Corporate Center, and the 140,000 square-foot Valencia Corporate Plaza (formerly Explorer Business Park). All are still searching for tenants to fill up the space.
Valencia Corporate Point, which was built to attract larger tenants, has yet to sign a lease in the year it has been on the market. Tourney Point is 33 percent leased and the Valencia Corporate Plaza is a little over 50 percent leased.
Brokers say part of the problem has been an inability to attract larger tenants, as was expected several years ago. They also blame the stubbornly high vacancy rate on the fact that, with just over 1.3 million square feet of total space, the Santa Clarita office submarket can see its vacancy rate soar when new projects enter the market.
"The fundamentals of the market are very strong," said David Solomon, senior associate with CB Richard Ellis. "The vacancies are concentrated in three projects."
Net absorption in the Santa Clarita office submarket was 69,891 square feet for the third quarter, after the area experienced a negative net absorption of 56,746 square feet in the second quarter.
During the third quarter of 1999, net absorption was 13,131 square feet.
Among the third-quarter deals was Advanced Bionics' lease for 122,000 square feet at North Campus at Rye Canyon Business Park. Enterprise Rent-A-Car leased 12,000 square feet also at Rye Canyon. The California Department of Insurance leased 23,000 square feet in Tourney Point in the Valencia Corporate Center.
Psomas Corp., an engineering firm, leased an additional 2,600 square feet at Valencia Corporate Plaza, bringing its total space there to 7,500 square feet. The average monthly asking Class-A office lease rate dropped to $1.86 per square foot in the third quarter, down from $2.20 in the second quarter.
Lindvall said the market has yet to come into its own, but he expects more employers to turn their eyes northward as the San Fernando Valley office market tightens.
"Obviously, employers have taken to Valencia in an extreme way as it relates to the industrial market," Lindvall said. "Office always lags behind. It's taken awhile to come into its own as an independent market area."
The industrial market has indeed been the area's strength.
The industrial vacancy rate in North Los Angeles County which includes both the Santa Clarita and Antelope valleys dropped to 4.9 percent in the third quarter, down from 5.2 percent in the second quarter, according to Grubb & Ellis.
"That's the big news," said Jim Linn, senior vice president with Grubb & Ellis. "The vacancy rate is continuing to drop." Linn added, however, that the number may not be entirely accurate, because several buildings delivered onto the market in the third quarter were not included in the statistics. Saris Regis completed a 142,000-square-foot industrial building in the Valencia Commerce Center that has not yet been leased. IIC Financial completed three buildings totaling 136,000 square feet, also in the Valencia Commerce Center. One of those buildings has been sold and the other two are still vacant.
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