Large Deals Give Late Burst To Otherwise Slow Market
By JOHN BRINSLEY
A couple of big deals at the end of the year highlighted a decent pick-up in the North County office market, and even the industrial market showed some signs of life.
While reluctant to proclaim a full-fledged recovery, brokers specializing in the Valencia and Santa Clarita markets said the impact from Sept. 11 seemed to be dimming. They even predicted that rental rates might rise later this year.
"In certain segments, the fourth quarter was slower than we had hoped, compared with the year before, affected in part by the events of 9/11," said Doug Sonderegger, senior vice president at CB Richard Ellis. "However, there were some very significant transactions."
While still less than impressive, the office vacancy rate in the area dipped to 17.6 percent in the fourth quarter, down from 19.6 percent in the previous quarter and 29.8 percent a year earlier, according to Grubb & Ellis Co.
The average asking monthly rental rate for office space was unchanged from the previous quarter at $1.93 per square foot, down from $2.31 a year earlier.
In the industrial market, the vacancy rate jumped to 7.5 percent from 5.7 percent in the third quarter, and 4.1 percent a year earlier.
The average monthly asking rent, at 59 cents a foot, was unchanged from the previous and year-earlier quarters.
Jim Linn, a Grubb & Ellis senior vice president, called the softening industrial market data "a little deceptive."
"We're still short of space in the medium-sized market, under 50,000 square feet," he said. "A lot of the vacancies, especially in Santa Clarita, are in buildings over 100,000 square feet."
Some of that may be due to the lingering impact of the terrorist attacks, which caused some larger corporate clients to reconsider big relocation or expansion deals. But brokers said the impact is waning. "Things are getting better," Linn said. "(The attacks) accelerated the trip to the bottom of the market, and I think we've seen the bottom."
Two large deals that closed in December were cited as evidence of that. First, Specialty Laboratories Inc., which runs technologically advanced tests to help diagnose rare illnesses, bought 13.8 acres on Tourney Road in the Valencia Corporate Center from Newhall Land and Farming Co. for an undisclosed sum. The company plans to build a three-story, 200,000-square-foot building on the site, scheduled for completion in the summer of 2003. It then plans to move from its current location in Santa Monica, bringing around 750 jobs to the area.
Then, the Packard Humanities Institute, a nonprofit foundation headed by computer heir David Packard, purchased 60 acres in Santa Clarita, also from Newhall Land. The foundation bought the site for the UCLA Film and Television Archive, the nation's second-largest media collection. "Both of these are very significant for the area in terms of employment, as well as the educational aspects UCLA brings," Sonderegger said.
Valencia-based Newhall Land was extremely active in the fourth quarter, as it also sold its 23-acre Rockwell Canyon Business Park property. The company declined to disclose specifics, but in its fourth-quarter earnings report it disclosed that those deals and others in the period had generated $24 million in revenue. It also said the sale of Town Center Plaza, a 26,000-square-foot office and retail building in Valencia, closed escrow in December, contributing another $6.7 million in revenue.
Despite such interest by investors, Linn said office rents likely would remain flat for the rest of the year. But he also said there could be a surge in purchases of small commercial buildings, given how low interest rates have fallen. "In smaller to medium-sized buildings, you may see an appreciation of rents," he said.
Others are even more optimistic, arguing that the North County's safe, suburban lifestyle will continue to draw corporate employers who are looking for ways to entice and retain personnel.
-Specialty Laboratories Inc. bought 13.8 acres on Tourney Road in the Valencia Corporate Center from Newhall Land and Farming Co. for an undisclosed sum. Specialty plans to build a 200,000-square-foot building there, scheduled for completion in mid-2003.
-Packard Humanities Institute purchased 60 acres in Santa Clarita for the UCLA Film and Television Archive.
-Avenue Crocker Investors of Los Angeles purchased a 90,000-square-foot industrial building at 28340 Avenue Crocker in the Valencia Industrial Center from Earle Properties of Agoura Hills for $5.6 million.
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