Firms looking to cash in on the housing boom in Valencia kept the North Los Angeles County real estate market percolating in the fourth quarter.
The Santa Clarita Valley’s housing market has remained strong, and now the area is anticipating the construction of the Newhall Ranch project. With 20,000 housing units, it is the largest planned master community in L.A. County history.
The surge in the region’s economy was not lost on traders of properties.
“With the low interest rates, state of the art construction, and an expanding economy, we’ve seen record sales,” said Craig Peters, executive vice president, CB Richard Ellis Group Inc.
The region’s largest deal was San Francisco-based RREEF Funds’ sale of a 324,000-square-foot portfolio of three Valencia Commerce Center buildings to ING Clarion for approximately $36 million. The buildings were fully leased at the close of escrow.
Rediger Investment Corp bought a package of eleven buildings from RREEF in a $10 million deal. The properties ranged from 5,000 square feet to 15,300 square feet in the Rye Canyon Commerce Center in Valencia.
Overall, there were 2.8 million square feet of industrial space either sold or leased in the fourth quarter, down from the 3.1 million in the third quarter but up from 1.9 million a year earlier. The vacancy rate remained steady at 2.3 percent. Asking rents rose two cents to 67 cents per square foot.
“Valencia property taxes have doubled, adding another 20 cents net to gross charge,” said Mike Tingus, president of Lee & Associates. “It’s given firms sticker shock when they factor in taxes, insurance, and maintenance.”
Grubb & Ellis Co. reported overall net absorption in the North Los Angeles market, which includes the San Fernando, Conejo and Antelope valleys, at 608,900 square feet, down from 1.4 million square feet in the third quarter.
Among major lease deals, Hitachi Power Tools took a planned 209,700-square-foot building on Witherspoon Parkway in Gateway III, Valencia Commerce Center. The Krausz Cos. Inc. will head up construction, with Hitachi’s move-in terms at $10 million for seven years.
Van Nuys-based Westrim Crafts leased a 111,400-square-foot building, also at Valencia Commerce Center, from Sheridan Ebbert Development and AEW Capital Management LP for 60 months for $4 million. The scrapbook importer will occupy the building in February.
Rentals dominate
The heated residential market also had a direct impact on the office market.
David Solomon, first vice-president with CB Richard Ellis, said that residential builders such as KB Homes already have a substantial presence in the Valencia office market, and given the likely impact of Newhall Ranch, title, escrow, and mortgage firms are racing to get in.
But with a shallow institutional sales base, office trading still lagged rentals.
“Once all the new development stabilizes, product will start to trade hands,” Solomon said. “In the past, the sales market in Santa Clarita was just land. Now you’ve got more product coming online and all that spec development is meant to move, not to be held as a long-term asset.”
Exceptions to the rule came from two Newport Beach-based buyers. CORE Realty Holdings bought Westridge Executive Plaza on the Old Road in Valencia. The three-story, 65,300-square-foot building was sold by local private investor, A & B Westridge LLC for $20.8 million. The Valencia Park Executive Center, a 66,600-square-foot office parcel on Avenue Stanford, traded for $11.6 million. Koll/PER LLC was the buyer, and F & F; Conway Associates LLC, based in Larkspur, was the seller.
Several large chunks of empty office space came online in the fourth quarter, skewing Santa Clarita vacancy rates upward. With a modest submarket base of 1.8 million square feet, firms such as Opus West Corp., which opened the second of two 77,400-square-foot parcels in Valencia, helped boost vacancies to 10.9 percent, up from 9.1 percent in the previous quarter. The building opened with asking rents at $2.65 per square foot.
