Just last quarter, Santa Clarita Valley tenant brokers were crowing about how decreasing asking rates could make the 2.8 million-square-foot northern submarket more attractive to renters. Not so fast.
After a steep decline in the opening quarter, average asking rates for Class A space rebounded dramatically in the second to $2.46 per square foot from $2.27 the quarter before, and surpassing the $2.43 rate reported a year ago, according to data from Jones Lang LaSalle Inc.
“That’s not necessarily an indication that everyone’s raising rates,” cautioned Ryan House, a vice president with Jones Lang LaSalle. “I don’t think we’re there yet. It’s more attributable to a Class A building that wasn’t on the market last quarter.”
The property in question is at 17901 Soledad Canyon Road. The partially finished building changed hands several times during the recession, and was finally completed in the spring by current owner Antranik Sinanian. It is somewhat removed from what’s traditionally considered the Valencia or Santa Clarita office market along the I-5 corridor.
“It’s ready to go now. They’re actively marketing it to medical and general office users,” House said.
With the valleywide vacancy rate near 20 percent for the third consecutive quarter, it’s definitely a tenants’ market. The second quarter vacancy rate inched up to 18.7 percent from 17 percent the prior period.
There were no investment transactions during the second quarter, and only one lease of note. The North Los Angeles Regional Center, which serves people with developmental disabilities and their families, relocated from the Valencia Corporate Center on Avenue Stanford to Gateway Plaza. The price tag for the 9,600-square-foot, 7.5-year lease was not disclosed. The California Board of Equalization is still expected to sign a lease for space in the area during the third quarter.
Brokers in the submarket look for residential growth and the continuing recovery to spur commercial lease and investment activity in the coming quarters.
“The residential housing market has always been a key driver in Valencia,” noted David Solomon, senior vice president with CB Richard Ellis Inc. in Universal City. “As that market continues to recover, the office market will benefit greatly from home builders, real estate companies and escrow companies.”
All those residents attract health care and human services organizations, creating another ray of hope for landlords.
“There are only a handful of office tenants that are growing,” House said. “A huge amount of absorption over the last three quarters has been medical users, like UCLA and Kaiser, who are seeing a greater need to expand their footprints in the market.”
UCLA, for example, took 35,900 square feet at 27235 Tourney Road at Valencia’s Tourney Point in the first quarter.
The 101 million-square-foot North L.A. industrial submarket, which includes the Santa Clarita Valley, also was slow.
Vacancy ticked up to 4.8 percent in the second quarter from 4.5 percent in the first, according to Jones Lang LaSalle. It’s the second-tightest market in Los Angeles County, behind only the 3.4 percent posted in the 183 million-square-foot Central L.A. market.
Average asking rates for the North L.A. submarket were 55 cents a square foot in the second quarter. Rates have held around that level for more than a year. Only property owners in the 159 million-square-foot South Bay area are asking for more (57 cents) for industrial space.
– Margot Carmichael Lester
The North Los Angeles Regional Center moved to Gateway Plaza with a 7.5-year lease for 9,620 square feet. The Rental rate was not disclosed.
A 102,113-square-foot office building at the Santa Clarita Professional Center at 17901 Soledad Canyon Road came on line.
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