Unilab, Voit Deals Stand Out as ‘Wait and See’ Approach Rules

By DAVID GEFFNER

Contributing Reporter

Vacancy rates in the San Fernando Valley were flat in the fourth quarter, halting the county-high slide that held sway through much of 2003.

Brokers described the year-end quarter as quiet, with sales, not leasing, driving activity. Vacancies were unchanged from the third quarter at 12.8 percent and down from 15.3 percent for the fourth quarter of 2002, according to Grubb & Ellis Co.

Overall, net absorption jumped to 195,718 square feet from 54,137-square feet during the previous three months, while Class-A asking rents dipped slightly, to $2.15 from $2.18.

Development was tepid. There was no new commercial construction, and only one deliverable: the 179,336-square-foot Phase III completion of LNR Warner Center at 21301 Burbank Blvd. About 39 percent of that building is rented, and 90 percent is set to be leased via letters of intent, mirroring what brokers estimate will be an overall 2 percent drop in Valley vacancy rates later this year.

Medical services giant Unilab Corp., snagged 160,000 square feet of office and warehouse space at 8401 Fallbrook Ave, The former Hughes aerospace plant was shuttered in the early 1990s and transformed to multi-tenant commercial use. The deal was valued at $60 million, one of the largest in the West Valley in more than a year.

Unilab’s 15-year lease, which includes a 15,000 square-foot warehouse slated to open this year, helped the West Valley register net absorption of 181,771 square feet, versus negative net absorption of 7,976 square feet in the previous three months. Rents in the submarket dropped marginally, to $2.18 from $2.22 per foot.

Bruce Frasco, senior managing director with Charles Dunn Co. in Woodland Hills, said “rents were lower (by roughly five cents) across the board in Warner Center than a year ago, due to a stagnant, wait-and-see market. The only new construction development to speak of has been change-in-use.”

Michael Slater, senior vice president with CB Richard Ellis in Ventura, noted that if interest rates stay flat until the November election, maintaining the emphasis on sales, “the trickle-down may benefit the strongest companies looking for aggressive lease deals.”

Countrywide Financial Corp., based in Calabasas, would not confirm broker reports that the company is set to purchase the 250,000-square-foot State Farm Insurance building at 31303 Agoura Road in Westlake Village. The deal was said to be valued in the $20 million to $25 million range.

Year-end investments were not entirely absent from the East Valley submarket. Chinatown landlords LaeRoc Partners LLC, which sold the Little Joe’s property earlier this year, paid $14 million (about $187 a square foot) for a 75,000-square-foot building at 4640 Lankershim Blvd. in Studio City. The building, bought last year by Younan Properties for $11.2 million, is fully leased, and did little to impact the drop in negative net absorption in the East Valley (68,688 square feet), nor the 2.5 percent jump in vacancy rates. The jump, to 14.1 percent from 11.6 percent, surpassed the 13.7 percent high in the like quarter last year.

Vacancy rates managed to dip slightly in the Central Valley submarket, to 10.5 percent from 10.8 percent, according to Grubb & Ellis, versus 11.9 percent in the fourth quarter of 2002. Net absorption was a positive 127,968 for the year.

The submarket was buoyed by DeWitt Stern Group’s five-year, $1.6 million leasing of 12,500 square feet at the Tri-Center Plaza, at 5990 Sepulveda Blvd. in Van Nuys.

On the industrial side was the purchase of the 26-acre General Motors Corp. site at Van Nuys Boulevard and Arminta Street in Panorama City by Voit Commercial Development and Selleck Development Group.

Although no price was disclosed, Mike Tingus, senior vice president with Charles Dunn, noted that land in the Central Valley submarket is selling at $15-17 per square foot, placing the deal’s value in the $17 million to $19 million range. The parcel includes a 220,000-square-foot building GM had used for emissions testing. The joint venture may develop another 250,000 square feet of industrial space as well as 32,000 square feet of retail late next year.

In the main, Central Valley tenants opted to renew rather than expand. These included two re-ups at the recently purchased Encino Executive Center at 16027 Ventura Blvd. Life Alert Emergency Response Inc. renewed its 21,000 square-foot occupancy for another five years, while Bank of the West secured 4,800 square feet for the next 68 months. The two deals, which tallied roughly $3 million, helped net absorption in the submarket reach 18,693, versus negative net absorption of 39,014 square feet in the year-ago period.

With nearly 700,000 square feet of net absorption overall in the San Fernando Valley market in 2003, “everyone that can build will not keep up with absorption, driving vacancies down to somewhere between 7 and 9 percent,” said John Sabourin, corporate managing director with Studley’s downtown L.A. office.

Major Events:

– Unilab Corp. snagged 160,000 square feet of office and warehouse space at 8401 Fallbrook Ave.

– Aetna Life Insurance signed a seven-year, $5.7 million lease on 34,000 square feet at The Arbors in Thousand Oaks.

– LaeRoc Partners LLC paid $14 million for a 75,000 square foot building at 4640 Lankershim Blvd. in Studio City.

– DeWitt Stern Group leased 12,500 square feet at the Tri-Center Plaza, at 5990 Sepulveda Blvd. in Van Nuys in a five-year, $1.6 million deal.

– At Executive Center at 16027 Ventura Blvd., Life Alert Emergency Response Inc. renewed its 21,000 square-foot lease for five years, while Bank of the West secured 4,800 square feet for 68 months.