-Elat Properties Investment and Development of Los Angeles sold a 21,806-square-foot Class B medical office building at 1141 N. Brand Blvd. in Glendale sold for $7.75 million.
-In a $7.25 million transaction, Peak Corporate Network purchased a Class B office building at 1015 N. Hollywood Way. The 30,959-square-foot building, built in 1986, was sold by Northern Trust Bank of California.
-Investor Nordhoff Chatsworth Portfolio sold off its Class B property at 20500 Nordhoff St. in Chatsworth to Abady Holdings Corp. in a $2.8 million transaction. The 23,014-square-foot property was built in 1977.
-Synear Food Holdings purchased a 189,170-square-foot food-processing plant from Nestle USA for $14.1 million in an all-cash deal. The property had been on the market for 290 days.
The San Fernando Valley office market continues to tighten, ushering in some of the lowest vacancy rates in Los Angeles County. San Fernando Valley office vacancies slipped to 14.3 percent in the third quarter, down nearly a point from 15.2 percent the previous quarter, according to data from Jones Lang LaSalle Inc.
Each of the Valley area’s submarkets saw tightening, though the central Valley was particularly hot, registering a 10.8 percent vacancy rate – lower than all other submarkets in the county save Beverly Hills.
The Conejo Valley reported an 11.8 percent vacancy rate, followed by East Valley and West Valley at 17.6 percent and 17.8 percent, respectively. The West Valley was the only submarket to see a rise in vacancy in the period.
The decrease in space was compounded by a scant 120,934 square feet of office space under construction, all of which is centralized in the two-building second phase of Conejo Valley’s Westlake Park Place project.
“Overall, the San Fernando Valley market has seen a lot of positive absorption with very little product available,” said Christopher Beck, managing director of Newmark Grubb Knight Frank’s downtown L.A. office. “It’s a perfect storm.”
Despite a selling frenzy, the leasing market has retained some flexibility. Tenants are still able to negotiate lease rates and claim free rent, but aren’t met with as much flexibility as in the past, he said. Class A asking rents are steady at $2.63, unchanged from the second quarter, but markedly increased from the $2.37 seen in the third quarter a year ago.
Most likely, the immobility in asking rents is only a brief intermezzo in an otherwise bustling market. Rates are expected to rise in the fourth quarter, signaling yet another move toward conditions that favor landlords and sellers.
Beck has seen a number of tenants make bids for early renewals and longer leases.
“Tenants are fearful that if the lease expires, they’ll have nowhere to go – nowhere they can afford to go,” he said.
“A lot of investors are looking at Los Angeles and wondering if it’s really the new Silicon Valley, where tertiary markets are turning into prime markets,” said Ryan Harding, a senior managing director of Newmark Grubb’s downtown L.A. office. “We’ll see our Silicon Beach expand into other areas.”
As the office submarket heats up, commercial office and industrial sales continue to keep step. Investors have shown renewed interest in real estate, and the promise of grabbing bargains before prices peak has increased the pace.
“I’ve been doing this since 1988, and I will have sold more buildings this year than any year I ever have,” said Stacy Vierheilig-Fraser, senior managing director of Charles Dunn Co. Inc. in Sherman Oaks. “Sales are going crazy.”
Perhaps the most notable third-quarter transaction was the $215 million sale of DreamWorks Animation’s Glendale campus. The seven-building campus was purchased by El Segundo’s Griffin Capital Essential Asset REIT. The seller, SunTrust Equity Funding, is an investment branch of Atlanta’s SunTrust Banks Inc. that flipped the property after buying it for $185 million in the first quarter.
– Laurie L. Dove
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