Industrial Market Strengthens While Empty Offices Abound
By NICOLE TAYLOR
The rates of office and industrial activity in North Los Angeles County diverged in the second quarter.
Industrial sales and leasing activity more than doubled to 621,714 square feet from 239,812 square feet in the first quarter, driving down vacancy rates to 11.9 percent from 12.9 percent in the previous period.
Meanwhile, the Santa Clarita Valley put more office space on the market than was leased, its vacancy rate climbing to 16 percent from 15.4 percent in the January-March period, according to Grubb & Ellis Co.
Despite the rise in office vacancies, brokers stressed that in such a small market, a negative turn was insignificant and that the area was still strong.
"The market is not taking a step backwards," said Jim Lindvall, senior vice president at Grubb & Ellis. "The trend is declining vacancy and positive absorption. Rental rates started to push up towards the end of the quarter."
Overall, however, office rental rates in the Santa Clarita Valley decreased to $1.89 per square foot in the second quarter, compared with $2.01 per square foot in the previous three months, according to Grubb & Ellis data.
Industrial rates held steady at 57 cents per square foot, the same asking rate in both the first quarter and like period a year earlier.
"We're starting to see vacancy rates in the San Fernando Valley decline again and that gives confidence to Santa Clarita Valley," said Lindvall.
David Solomon, vice president at CB Richard Ellis Inc., cited the high rental rates and low vacancy rate at the four-building Town Center Drive in Valencia as an example of the area's health.
"It's a supply constrained area and it's amenity rich," he said. "More people are moving to Valencia and there is more of a desire to work in the area."
Both Lindvall and Solomon cited the dearth of large portions of available space as a reason for the lack of activity in the second quarter. "There are the main places with space, Westridge (Executive Plaza) and Summit at Valencia, and we're seeing the majority of leasing activity there," said Lindvall.
The Summit at Valencia registered two lease deals in the second quarter, according to Solomon. Tarzana-based United Pacific Mortgage signed a 5-year lease for approximately 4,000 square feet and Crown Management leased 4,500 square feet.
The Westridge Executive Plaza is under construction, with completion slated for the second half of 2003. Located at Valencia Boulevard and Old Road, the three-story building will add 66,000 square feet of office space to the market. Solomon anticipates the building to be nearly full when it opens.
In the industrial market, sales and leasing activity increased, feeding the decline in vacancies.
"In the Santa Clarita market, there's been three transactions over 100,000 square feet and two of those were in the second quarter," Jim Linn, senior vice president at Grubb & Ellis. "From the sales standpoint, there is product available in the (large) size range, which hasn't been available in years past, and low interest rates have contributed as well."
Sales activity in the second quarter was concentrated in the Valencia Commerce Center. The largest deal was the purchase of a 170,450-square-foot building by manufacturer GG Industries from APW North America Inc. In another deal, Foreman Properties bought a 101,255-square-foot building from developer Panattoni Development Co. in the same business center.
A & B; Properties Inc. purchased a two-story 51,061 square foot building in the complex.
Another notable sale was Star Nails Products' purchase of 65,806 square feet in Valencia Commerce Center as part of a relocation from Valencia Industrial Center.
With low interest rates helping the sales market overall, small building sales have remained strong as well. Vacancy rates for space under 100,000 square feet are estimated to be below 8 percent, according to Doug Sonderegger, senior vice president at CB Richard Ellis.
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