-The Sunrise office building, at 16200 Ventura Blvd. in Encino, sold in June for $12 million. Soma Encino of San Francisco purchased the 55,500-square-foot property.
-Raffi Paichuk paid $2 million for a Class C industrial building at 5535 Cahuenga Blvd. The 19,000-square-foot warehouse in North Hollywood was built in 1947.
-Video and lighting services company Global Trend Productions Inc. bought a 36,546-square-foot Class B industrial warehouse at 10537 Glenoaks Blvd. in Pacoima for $4.7 million.
-Hayes Capital Management purchased a Class B office building at 5125 Lankershim Blvd. in April for $7.8 million. The 57-year-old North Hollywood building had been last renovated in 1983.
The San Fernando Valley’s commercial submarkets remained heated in the second quarter despite widespread rate-creep continuing to affect tenant costs in the office sector.
Class A asking rents climbed to an average of $2.64 a square foot, a 6 cent increase from the previous quarter and a notable jump from $2.37 a year earlier.
The East Valley continued to take the lead, commanding lease rates of $2.97 a square foot, according to data provided by Jones Lang LaSalle Inc.
The second-quarter rate increase reflected shrinking office vacancy. The Valley’s overall vacancy rate was 14.1 percent in the quarter, down nearly a point from 15.2 percent in the first quarter, but still above the 13.7 percent vacancy rate a year ago.
“We’re seeing rents increase across the board. Most landlords have caught on to the fact that there’s no real development occurring in the market right now and vacancy rates are continuing to decline,” said Ryan House, a vice president at JLL. “We’re transitioning from the tenant’s market we’ve experienced for so long to a landlord’s market.”
With that transition, added House, come fewer tenant perks. The days of free rent and eagerly made building improvements are vanishing as competition for Class A office space continues to build. There are even reports of leases landing north of the $3-a-square-foot mark in pockets of Sherman Oaks, said Jonathan Larsen, principal and managing director of Avison Young.
“I forecast rents in the office submarket to go up the next 12 months at least,” Larsen said. “There is a limited supply of Class A office space in close proximity to the 405 (Freeway) and Ventura Boulevard, and a limited amount of large, contiguous space.”
Office and industrial sales were also on the rise in the quarter.
“There’s very little product on the market and sales are going like crazy,” said Stacy Vierheilig-Fraser, senior managing director at Charles Dunn Co. Inc. “By the time you call on a listing, it’s gone. What’s on the market has multiple offers and a lot of people are paying cash.”
Perhaps the most notable second-quarter deal was a $43 million deal for NoHo Commons. The 65,000-square-foot North Hollywood retail center, at 5300 Lankershim Blvd., was purchased by JH Real Estate Partners Inc., netting $705 a square foot for seller RedRock Noho Retail. The center, which opened in 2004, is 97 percent leased. The seller purchased the project in 2007 for $30.5 million.
Investment activity is expected to remain strong in the industrial sector, said House. “We’ve really seen an uptick in the last six to 12 months in the sale of investment-grade assets.”
While commercial industrial sales have lagged in the previous five years, a lack of new construction in the Valley seems to be prompting some reconsideration. Coupled with a rebounding economy, the shift is energizing some of the region’s most stagnant sectors.
“There’s some optimism in the market,” House said. “We seem to be rounding the corner and people are realizing we’re transitioning from a tenant’s market to a landlord’s market.”
– Laurie L. Dove
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