The mad rush into the Santa Clarita Valley continued through the fourth quarter as companies relocate from the San Fernando Valley in search of bigger, more modern facilities.
Vacancy rates ticked up slightly in the already tight industrial market, to 3.9 percent from 3.8 percent in the previous three months, according to Grubb & Ellis Co. Another 162,167 square feet was absorbed in the quarter, bringing net absorption for all of 2004 to nearly 3 million square feet.
"When companies consider expanding, Santa Clarita is becoming a natural choice," said Jim Linn, senior vice president at Grubb & Ellis.
In the smaller office market, vacancies fell to 6.6 percent in the fourth quarter from 9.2 percent in the third.
Quality of life benefits are also major drivers of both industrial and office moves, according to Craig Peters, executive vice president at CB Richard Ellis Group Inc. The area has excellent school systems and consistently high rankings in community safety.
"A lot of the decision-makers at those companies are relocating their homes to this area," Peters said, adding that Class-A office vacancies were practically nonexistent.
After breaking through the $2 barrier in the third quarter at $2.04 per square foot, rent for Class-A office space rose to $2.08 per square foot in the fourth quarter of 2004, compared with $1.80 per square foot for the year ago period.
Net absorption totaled 40,479 square feet in the fourth quarter, up from 9,652 square feet in the third.
Option One Home Mortgage, a division of accounting firm H & R; Block Inc., leased 21,380 square feet of offices in Tourney Place Phase I for about $5 million.
Still, there were only 1.6 million square feet of office space in the market during the fourth quarter, although several projects were planned or beginning construction.
In December, Opus West broke ground on Opus Corporate Center, which will become 150,000 square feet of office space spread out over two buildings.
In the industrial market, much of the fourth quarter activity occurred in Valencia Commerce Center. Archway Marketing Services and Cintas Corp. will both be relocating this year from Van Nuys. Archway leased a 93,519-square-foot-building for approximately $5 million, and Cintas leased 35,310 square feet for approximately $2 million.
P-3 Corp., originally based in Sylmar, subleased 119,480 square feet for around $3.5 million and will move its operations to the Valencia Commerce Center.
The industrial market had 857,325 square feet of buildings under construction as of year-end. Another 1 million or so square feet is planned over the next year-and-a-half.
Jerry Pelton and Pacifica Cos. broke ground in November on Valencia Center I, with nine buildings planned, ranging from 8,110 square feet to 31,425 square feet.
Also, RREEF Funds and Legacy Partners broke ground in October on the Rye Canyon Commerce Center, which will bring 234,516 square feet of space in a 26-unit industrial condo.
The biggest land purchases of the quarter were also in the Valencia Commerce Center.
LNR Property Corp. bought 11 acres from Newhall Land and Farming Co. for about $5.5 million, and the company is planning six industrial buildings ranging from 27,000 square feet to 51,000 square feet.
Sheridan-Ebbert Development and AEW Capital purchased 5 acres from Newhall Land for about $2.6 million. The plan is for a 110,008-square-foot speculative industrial building on Witherspoon Parkway.
Brokers in both the office and industrial markets said they were encouraged by the reopening of the Palmdale Regional Airport on Dec. 29.
It had been seven years since commercial airlines used the airport until Las Vegas-based Scenic Airlines started offering 10 flights per week between Palmdale and Las Vegas. Though the flights are just 19-seaters for now, bigger flights are expected.
"It will certainly have an effect on our market look, we have an operating airport now," said Jim Patton of jpBroker.com, a real estate firm in the Antelope Valley. "If it works out well, there will hopefully be more airlines coming in."
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