Improving demand and a determination to close deals during the quarter fueled the San Fernando Valley office market, which is making a slow but steady recovery.
For the seventh time in nine quarters, the Valley absorbed space, taking 145,500 square feet off the market. That dropped the vacancy rate four-tenths of a point to 16.6 percent, the lowest it has been in three years, according to Jones Lang LaSalle Inc.
“The market feels consistently better in the last 12 to 18 months and deals are getting done,” said Paulette Toumazos, principal at Lee & Associates in Sherman Oaks.
Some areas fared better than others, however.
The central Valley outperformed its neighbors, with its vacancy rate falling seven-tenths of a point to 12.3 percent.
“The smaller professional services buildings in the 3,000- to 5,000-square-foot range in Sherman Oaks and Encino are seeing significantly more activity,” said Ryan House, a vice president at Jones Lang LaSalle. Rents in the central Valley remained steady during the quarter, but landlords may increase prices in the next six months to a year, he added.
The market is being driven by both traditional office space as well as wellness centers, including healthy living and therapeutic practices.
“The nontraditional medical center is really growing.” Toumazos said.
The West Valley was the laggard this quarter, giving back 65,500 square feet as vacancy rates rose half a point to 19.4 percent. Still, LNR Warner Center benefited from a seven-year, 46,701-square-foot lease signed by Activision Publishing, a subsidiary of Santa Monica video game company Activision Blizzard.
“It’s not just Santa Monica and Venice where the tech companies and younger demographic is going,” House said.
The addition of multifamily residential units around Warner Center is adding an employment pool in the heart of the West Valley that will continue to bring high-end skilled labor into the community, said Jay Rubin, principal at Lee & Associates in Calabasas.
“There’s a trend coming to fruition in the West Valley that will be enhanced by the pending completion of the Warner Center specific plan that will encourage more development, density and opportunity,” Rubin said.
The East Valley saw a sharp drop in asking rents, which contributed to an overall decline of six cents in the rate across the San Fernando Valley to $2.18.
Still, the East Valley had the region’s second lowest vacancy rate and took 79,000 square feet off the market in the quarter.
Activision Publishing signed a seven-year, 46,701-square-foot lease at LNR Warner Center at 21215 and 21255 Burbank Blvd. in Woodland Hills.
The 154,000-square-foot Tampa Plaza retail center in Northridge sold for $90 million, or $354 per square foot, to a joint venture of Angelo Gordon & Co. and CorAmerica Capital LLC. The seller was Red Mountain Group Inc. The property went through an off-market forced sale that was held in receivership until completion. The center was originally constructed in the 1970s; its most recent building went up in 1995. The property was 89 percent occupied in August when the sale occurred.
QBE Financial Institution Risk Services signed a five-year, 44,436-square-foot lease at 8407 Fallbrook Ave. in West Hills. It previously had offices in Simi Valley. The mortgage and auto insurance company employs 3,200 nationally and is based in Atlanta.
Reality television producers Bunim/Murray Productions signed a 10-year, 44,500-square-foot lease at 5900 Sepulveda Blvd. in Van Nuys. The Emmy Award-winning company is widely credited with creating the reality television genre in 1992 with “The Real World.” Its shows include “Project Runway” and “Keeping Up With the Kardashians.”
UEI College leased 16,000 square feet for a new campus at 5445 Balboa Blvd. in Encino. The for-profit career training college will establish classrooms and administrative offices on the first and second floor of the two-story property. The building was built in 1980 adjacent to Sepulveda Dam Recreation Area. Renovations are ongoing and a move-in date has not been established.
Hillcrest Christian School purchased a 69,597-square-foot property for $17.5 million at 9825 Woodley Ave. in North Hills. The seller was Los Angeles Baptist City Mission. The school was built in 1962.
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