Vacancy rates remain in a slide across San Fernando Valley, dropping to 13.3 percent in the third quarter and showing marked improvement from the nearly 15 percent rate recorded the previous year. Tenant demand remains steady, with the 170,400 square feet absorbed in the period matching the amount taken off the market in the previous quarter, according to data from Jones Lang LaSalle Inc.
The Valley office submarket continued to shrug off a string of sluggish quarters, with nearly 580,000 square feet absorbed so far this year, according to JLL.
Each of the Valley’s submarkets saw vacancies drop, though the West Valley, with a 14.8 percent vacancy rate, remains the roomiest. At the other end of the spectrum, the Central Valley’s tight 10.3 percent is the second lowest in Los Angeles County, eclipsed only by Beverly Hills.
“The market has really picked up. More people have money, so we’re really seeing it rebound,” said Stacy Vierheilig-Fraser, senior managing director with Charles Dunn Co., pointing to a recent land listing that garnered 18 cash offers within four business days. “I think people are feeling more optimistic.”
Vierheilig-Fraser said the uptick was seen on the investment side as well. She saw eight third-quarter sales, ranging from $5 million to $50 million. Among them was a $49 million cash purchase by Granite Properties Inc. of Plano, Texas, of a 150,000-square-foot office building at 2600 W. Olive Ave. in Burbank.
On the leasing side, average monthly asking rents held firm from the previous quarter at $2.37 a square foot, down from $2.45 a foot the previous year. In comparison, rates on the Westside hit $4.08 a square foot, up from $4.02 in the second quarter.
Throughout the Valley, a lack of new development has been a critical obstacle in acquiring sizable tenants.
“It’s difficult for larger tenants to find alternative spaces when their leases come up for renewal in that market,” said Ryan House, JLL’s Valencia-based vice president.
With vacancy rates inching toward the 10 percent mark, he expects rates will begin to swell, spurring developers to jump into the market.
“As space availability continues to decrease, lease rates will continue to increase,” House said. “It’s just a matter of, at what point does it trigger new construction or redevelopment?”
One of the first signs of a market swing toward creation of new inventory is the massive redevelopment of the former Sunkist Growers Inc. office building at 14130 Riverside Drive in Sherman Oaks.
Residential developer IMT Capital Inc. purchased the 8.3-acre property for about $36 million in early 2013 with plans to convert it into a 360,000-square-foot mixed-use development that will include apartments, commercial space and a six-story parking structure.
In addition, an existing 120,000-square-foot office building will be rehabbed, said House, a move that could open the market to larger tenants interested in relocating within the Central Valley.
– Laurie L. Dove
San Fernando Valley
Crow Holdings of Dallas paid $95 million for Alta Warner Center, a 298-unit luxury multifamily Warner Center community. The 295,000-square-foot complex, at 6701 Eton Ave. in Woodland Hills, opened in 2013.
The 334,000-square-foot Warner Center Marriott, at 21850 Oxnard St. in Woodland Hills, was purchased for $89.8 million by L.A. Warner Hotel Partners. The new buyer plans $10 million in capital improvements to the 29-year-old property, to be completed by early 2016.
Rexford Industrial Realty of Los Angeles paid $30.5 million for a 319,300-square-foot industrial property on 11.8 acres in Chatsworth. The property, at 9120 Mason Ave., is fully leased through 2020 and was last renovated in 1999.
Plaza Del Sol, a collection of three retail properties at 10950-10970 Sherman Way, was purchased for $26 million in July. According to the purchaser, Tourmaline Capital, the 165,500-square-foot retail center in Burbank was fully leased at the time of sale. A Vallarta Supermarket anchors the property.
