Rents Tumble as Space Floods Market

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While few recession-slammed markets in L.A. County have had good news to report, the San Fernando Valley seems to be hurting more than most. The region finished the second quarter giving back nearly 600,000 square feet of office space year to date, while Class A rents plummeted 30 cents below the same period last year.

The West Valley, in particular, was hard hit with vacancies reaching the 20 percent mark, and negative year-to-date absorption of 195,915 square feet, which led all other submarkets.

“Warner Center has seen its volume of influx decrease dramatically,” said Jim Lindvall, managing director with Jones Lang LaSalle Americas. “Vacancies won’t reverse until the national trend in unemployment turns around, and even after that does happen, it’s typically another 18 to 24 months before that change is reflected in lowered vacancy rates.”

Despite the gloomy numbers, some firms still saw value in the West Valley. Wachovia Securities inked a 35,000-square-foot renewal and expansion deal at the original LNR Warner Center complex, 5820 Canoga Ave., in Woodland Hills. Nearby, one of the complex’s offshoots, LNR Warner Center Phase IV, 21255 Burbank Blvd., is still not 50 percent leased 18 months after its debut. However, owner LNR Property Corp. inked up Wells Fargo, Kelmar Associates LLC and Humana Health Care for roughly 16,000 square feet of space.

In the East Valley, brokers said the strong entertainment base that has helped weather past downturns has gone flat. They point to a 19 cent cut in Class A rental rates and a supply base that has far exceeded demand.

“I’m getting a call a day from a landlord with space coming back,” remarked Stacy Vierheilig-Fraser, senior managing director for Charles Dunn Co. Inc. in Studio City. “Tenants are handing over the keys or going into receivership.”

Overall, market jitters were reflected by a smattering of long-term deals, including Proactive Media locking up 7,457 square feet for 84 months at 16130 Ventura Blvd. in Encino.




Office Market At a Glance

Inventory: 28.3 million square feet

Under Construction: 180,000 square feet

Class A Asking Rents: $2.52



MAIN EVENTS


– Coastal Media Group LLC signed on for 11,361 square feet for 90 months at an undisclosed rate with Calabasas TC Properties LLC at the Calabasas Tech Center, 26660 Agoura Road. The building is part of the former Cabi/Arden Portfolio, now controlled by real estate investment firm Hines.

– Wachovia Securities signed a 35,000-square-foot renewal and expansion deal with owner and property manager Hines for undisclosed terms at 5820 Canoga Ave. in Woodland Hills. The three-story, 92,000-square-foot Class A office building is part of a five-building campus LNR Property Corp. developed and then sold to Hines in late 2006. Including the Wachovia renewal, the entire complex is more than 90 percent leased.

– LNR Property Corp. signed up three tenants for Building D, 21255 Burbank Blvd., at LNR Warner Center Phase IV, which is nearly 50 percent vacant 18 months after coming on line. Tenants Wells Fargo, Kelmar Associates and Humana Health Care took a cumulative 16,000 square feet under terms kept confidential.

– Proactive Media signed on for 7,457 square feet at 16130 Ventura Blvd. in Encino. Terms with landlord Woodrise-Encino LLC inside the 90,000-square-foot Class A high-rise were for seven years at $2.55 full service gross.

– Civil litigation and construction defect law firm Hamrick & Evans LLP renewed for 12,663 square feet at 10 Universal City Plaza in Universal City with new owner Five Mile Capital Partners. Terms were roughly $3 per foot full service gross.

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