Lease Activity Looking Up as Acquisition Properties Drying Up

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Vacancies remained steady at 13.4 percent across the San Fernando Valley in the fourth quarter, just north of the 13.3 percent recorded the previous period and down from 14.8 percent last year.

Asking rents continued to reflect the tight office submarket, edging upward to $2.43 from the third quarter’s $2.37, according to data provided by Jones Lang LaSalle Inc.

The Valley continues to shrug off a string of sluggish quarters, a performance marred only by a 33,000-square-foot negative net absorption in the fourth quarter, a significant drop from the 170,000 square feet taken out of circulation in the third quarter. The negative net absorption occurred primarily in the West Valley and was likely the result of tenants consolidating as they played musical chairs, said Briana Krank, an associate with Avison Young.

“There was a lot of movement among smaller and midsize companies, with a lot of deals in 2014 that didn’t have commencements until this year,” Krank said, pointing to the 146,636-square-foot Universal Music Group lease that will begin Feb. 1 at the LNR Warner Center at 21301 Burbank Blvd. in Woodland Hills, as well as tenants displaced by the consolidation of Farmers Insurance Group in Warner Center.

The submarket’s most active area continues to be the Conejo Valley, with 29,487 square feet of positive net absorption in the fourth quarter. At 14.2 percent, Conejo still has one of the roomiest vacancy rates in the San Fernando Valley, outside of the West Valley’s 15.3 percent.

Even with the San Fernando Valley’s overall asking rents rising to $2.43, the area remains a bargain compared with Westside rents, which reached a robust $4.19 a square foot in the fourth quarter.

While leasing hits its stride, sales are expected to lag because of the Valley’s scarce inventory.

“There’s not very much for sale on the market, but there are quite a few people looking for investments, as well as some owner-user inquiries. Demand is definitely picking up,” said Stacy Vierheilig-Fraser, senior managing director at Charles Dunn Co. Inc.

The Valley’s industrial submarket mirrors the strength of its office submarket. The North County industrial vacancy rate was 3.7 percent in the fourth quarter, down from 4.2 percent in the third quarter and 5.5 percent the previous year, according to JLL.

In the fourth quarter, 4.6 million square feet were sold or leased, a marked increase from the 2.9 million recorded in the previous quarter and the 1.2 million square feet moved during the fourth quarter of 2013. Activity could slow in 2015 if inventory remains limited.

“There’s a lack of supply (in the industrial submarket),” said Nigel Stout, executive vice president at JLL. “A healthy market will have 10 percent vacancy, so 3.7 percent is not a lot of product.”

As a result, asking rates and sale prices are rising. Tenant amenities, particularly those that were once negotiating points, are harder to come by as it becomes a challenge to find available industrial space.

– Laurie L. Dove

Main Event

NewTower Trust Co. sold the Northridge Business Center in a $46.4 million transaction to Shubin Nadal Realty Investors. The four buildings were 75 percent leased at the time of sale and will see $20 million in improvements.

DiNapoli Capital Partners sold Meadowbrook Senior Living, 5217 Chesebro Road in Agoura Hills, to American Realty Capital Healthcare for $60 million. The 137,000-square-foot, 156-unit property is 90 percent leased.

Sylmar Towne Center at 12629-12721 Glenoaks Blvd. was sold to Primestor Development Inc. The $31 million price included 148,000 square feet spread across four buildings. Tenants include Big Lots, Bank of America and O’Reilly Auto Parts, among other retailers.

Village at Northridge, a 271-unit retirement community, sold for $152 million to Senior Resource Group of Solana Beach. In addition to the 354,000-square-foot property at 9222 Corbin Ave., the transaction included 3.12 acres of undeveloped adjacent land.

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