Pace of Activity Slows as Lack Of Available Space Hits Market
By NICOLE TAYLOR
The office and industrial markets in North Los Angeles County showed strength in the third quarter, with vacancy rates decreasing significantly in both areas.
Despite a decline in sales and leasing activity from the previous three months, the industrial market registered an 8.6 percent vacancy rate for the July-September period, down from 11.9 percent in the previous three months and 14.1 percent in third quarter a year earlier.
Office activity picked up, with net absorption back in positive territory and the vacancy rate dropping almost four points to 12.1 percent in the third quarter, according to Grubb & Ellis Co.
Despite declining vacancies, office and industrial registered declines in their rental rates, with the average asking rate for industrial space at 55 cents in the third quarter, down 2 cents from the previous three months. Class-A office rates in the third quarter fell nine cents, to $1.89 per square foot.
Jim Lindvall, senior vice president at Grubb & Ellis, noted the trend of homebuilders leasing office space to establish satellite and regional offices in order to accompany the rapidly expanding residential market. The area includes Newhall, Santa Clarita and the Antelope Valley.
Although there is still space in the under-1,500 square foot range available, the area currently has only one park, the Summit at Valencia, with large blocks open.
The three-building, 180,000-square-foot Summit, now half full, has seen most of the activity in the office market over the past few quarters. It started the year with only 17 percent of its space leased, according to David Solomon, vice president at CB Richard Ellis.
The Summit registered two lease deals in the quarter. Life science technology company Qiagen Inc. signed a 7.5-year lease for about 30,000 square feet, valued at close to $5 million, and the state Department of Consumer Affairs leased 7,403 square feet for around $1.5 million.
Scheduled for completion in the fourth quarter, Westridge Executive Plaza will add 66,000 square foot of office space in the area, with Solomon anticipating it to be close to 100 percent leased when it opens.
With little new product coming onto the market in the near future, brokers anticipate another round of positive absorption and lower vacancy rates in the fourth quarter.
The industrial market in Santa Clarita Valley had another positive quarter.
"We've continued to see improvement, with sales very active and leases improving," said Doug Sonderegger, senior vice president at CB Richard Ellis. Sonderegger points to Westinghouse Place, a project with eight industrial/technology units totaling 50,000 square feet in Valencia, which is slated for completion in November. "(It's) not even completed and we have six of them already in escrow," he said.
Although Santa Clarita Valley sales and leasing activity declined to 475,679 square feet from more than 620,000 in the second quarter, the area was busy with companies looking to expand.
"User activity has increased substantially over the past 12 months," said Craig Peters, senior vice president at CB Richard Ellis. "We're looking at not only local companies expanding in Valencia Gateway, but also companies relocating (there)."
The Valencia Industrial Center recorded three large transactions. American Honda purchased 123,450 square feet, expanding within the Valencia area. UltaViolet Devices Inc. signed a 5-year lease for 44,702 square feet and Bayless Engineering leased an additional facility within the Center, totaling 38,535 square feet.
At the Valencia Commerce Center, Hydro Systems purchased 84,320 square feet, having moved from Simi Valley, and Semiconductor Process Equipment Corp. purchased 38,362 square feet. Cal Pump leased a 38,933 square foot building, relocating from the San Fernando Valley.
Jim Linn, senior vice president at Grubb & Ellis, expects to see activity keep pace for the remainder of the year. "There's been a good amount of activity in the larger size range relative to the last couple of years," said Linn. "We'll probably see one or two more deals over 100,000 square feet before the end of the year."
Although Linn said there wouldn't be any large speculative buildings coming onto the market over the next year, he noted two purchases of land for development at Centre Pointe.
Clark Management & Development, which purchased 14 acres from Centre Pointe owner Spirit Properties, has plans for 14 buildings on the property, with construction starting on Phase I this quarter. Phase I will include seven buildings, equaling approximately 140,000 square feet combined, with completion in about a year.
Fairway Commercial Partners purchased 15 acres in Centre Pointe as well. Fairway sold six lots, with plans in the remaining space for three buildings between 30,000 to 40,000 square feet each and a multi-tenant building, with slightly less than 40,000 square feet for lease. The project has roughly the same time frame as the Clark deal, said Linn.
-Qiagen Inc. signed a 7.5-year lease for approximately 30,000 square feet at the Summit at Valencia, valued at close to $5 million.
-The state Department of Consumer Affairs, leased 7,403 square feet at the Summit at Valencia for approximately $1.5 million.
-American Honda purchased 123,450 square feet in Valencia Industrial Center.
-UltaViolet Devices Inc. signed a 5-year lease for 44,702 square feet in the Valencia Industrial Center.
-Bayless Engineering leased an additional facility within the Valencia Industrial Center, totaling 38,535 square feet..
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