A new research report on the local retail real estate market paints a grim picture, with the Los Angeles County vacancy rate hitting a 10-year high in the first part of 2009.
The vacancy rate hit 5.3 percent in the first quarter, up from the 3 percent rate a year earlier, according to the report by Marcus & Millichap Real Estate Investment Services Inc.
Blame it on the recession, which has zapped consumer spending and forced store closures that have dumped more space on the market. Sagging sales have put pressure on landlords, who have been forced to make concessions to struggling tenants.
?n order to keep your retail center filled you have to undercut what you were asking six month ago and maybe increase concessions,?said Chris Maling, senior director of Marcus & Millichap? national retail group. The report said that asking rents have declined 1.2 percent year over year.
More than 3 million square feet of new retail space was delivered in the last year, according to the report. All of that space hit the market during the economic downturn, creating what amounts to a glut, Maling said.
? lot of projects in 2007 were delayed substantially because they just couldn? get the materials, there was just a backlog,?he said. ?ombine that with delays on loan commitments and then you?e got a very slowed leasing marketplace.?p>Maling believes that it could take until fourth quarter 2011 for the market to be on a ?efinite upward trend.?p>
Creative Deal
Mates Inc., which provides instrument storage and practice space to musicians, has signed a $1.5 million lease for 53,509 square feet of industrial space at 15814 Strathern St. in Van Nuys.
The lease, which closed in late April, is for five years, though Mates first moved into the property owned by Beverly Hills real estate companies Arka Properties Group Ltd. and Black Equities Group in January. A creative deal was structured to get the company in the building, giving the tenant a noteworthy bargain for the first year.
The Colliers International brokerage team that represented the landlord had been unable to find a tenant for the property late last year, so it got permission from the owner to cut its asking rent dramatically, from 65 cents per square foot per month triple net to 39 cents per square foot per month. The brokerage team advertised that low rate as a first-year special.
?hat convinced Mates to take a look at it was the low asking price,?said John DeGrinis of Colliers, who represented the landlord.
When Mates first moved in, the company was only interested in leasing a portion of the building, so it agreed to a month-to-month lease of 21,400 square feet at the bargain rate.
?hey realized this thing was really working well and decided to take the whole building,?said DeGrinis. The five-year deal starts at the 39 cents rate but reverts to the 65 cents rate in the second year.
Patrick DuRoss and Jeff Abraham of Colliers also represented the landlord. Mates was represented by Billy Walk of CB Richard Ellis Group Inc., who declined to comment because he wasn? authorized to speak about the lease.
Staff reporter Daniel Miller can be reached at [email protected] or (323) 549-5225, ext. 263.
GROUND BREAKING
Pauley Pavilion Renovation
What: UCLA? famed multipurpose arena, where the storied men? basketball program plays
Where: On the UCLA campus in Westwood
Amenities: About 1,200 additional seats, new railings and walkways; 25 more points of sale for concessions; new locker rooms; and a revamped exterior
Price: $185 million
Status: Project will break ground February
Architect: NBBJ
Details: Famed Pauley Pavilion is getting a long-overdue facelift. The arena, which is home to the UCLA men? basketball team is a bit long in the tooth, with shabby concession stands, narrow aisles and seating limitations that keep fans far from the action. However, architect NBBJ? plan addresses those issues and many others. The arena, which was designed by architect Welton Beckett and opened in 1965, is getting a new exterior and interior, which will make it more fan-friendly and bring it up to current code. Renovations will begin next year and should be completed in time for the 2012-13 men? basketball season.
