-The 194,439-square-foot, three-building Valencia Corporate Center (28470, 28480 and 28490 Avenue Stanford) was sold by Parallel Capital Partners to True North for $41.2 million, or $212 per square foot.
-The 21,000-square-foot owner-user property at 27413 Tourney Road in Valencia was sold to Gothic Landscaping for $5.5 million. The seller, American Pacific Industries, relocated to Arizona.
-Real estate brokerage S.D. Herman purchased a 52,510-square-foot building at 27655 N. Avenue Hopkins in Valencia from Hopkins Retail Limited Partnership. Terms were not reported.
-MegaGoods, a distributor of consumer electronic and video games, bought 26308 Spirit Court, a 44,944-square-foot industrial building in Santa Clarita, from William S. Hart High School District for undisclosed terms.
-Landing gear overhaul and repair company Sunvair leased 77,064 square feet at 29145 The Old Road in Valencia. Terms were not disclosed.
It was a busy summer for Santa Clarita Valley’s capital markets. Though lease velocity was low, several properties changed hands and investors still prowl the rolling hills of Valencia and Santa Clarita.
“Despite some of the global economic swings, demand for space from companies continues to be very strong,” noted Craig Peters, executive vice president at CBRE Group Inc. in Universal City. “Coupled with the lack of available buildings, we’re seeing a very competitive environment.”
The most notable sale involved the Valencia Corporate Center on Avenue Stanford. Parallel Capital Partners sold the three-building Class A campus for about $41.2 million, or $212 a square foot, to True North Management Group.
Ryan House, a Jones Lang LaSalle Inc. vice president in Valencia, attributed the increased deal flow to a strong belief in the submarket’s return.
“Most of the current ownership – who maybe purchased between 2005 and 2010 – had plans of only holding those properties for three to five years,” he explained. “They’re already past their projected hold period. With the market now turning the corner, they’re thinking it’s time to sell those assets and close out certain funds.”
Two other significant projects are on the market right now: the four-building Valencia Town Center, 24201 Valencia Blvd., and Westridge Executive Plaza, 26650 The Old Road, the latter of which was in escrow at the end of the quarter.
“Several companies competing for the same building is not uncommon and leads to increases in land values, building lease rates and sales prices,” Peters pointed out. “These value increases are important as they now justify new development in the SCV.”
But don’t expect a rash of spec projects to put cranes in the air. Several projects are in various stages of development – with delivery on many expected late next year. That will take care of some of the pent-up demand. Developers need something more concrete before starting anything right now.
“Everyone would like preleasing activity,” JLL’s House said. “They are openly marketing proposed projects in anticipation of a larger user coming along with occupancy requirements 18 to 24 months out who will negotiate a deal that allows investors to get the financing to build.”
You couldn’t blame brokers if they were feeling more bullish than usual. The fundamentals do look good.
“With industrial vacancies in the sub-2 percent range, landlord challenges are primarily how can they move up rents to market on lease renewals,” Peters said. “For some tenants, that could be a more than 25 percent increase.”
Office vacancy is slowly declining, too, according to JLL research. Available space dropped to 13 percent at the close of the third quarter from 15.3 percent a year ago. Average asking rates for Class A space have been around $2.60 all year.
Whether industrial or office, House suggested tenants should start looking now at renewals, expansions and relocations, even if their lease expirations are still a ways off.
“Six months from now, a year from now? We’ll be looking at still higher rents and fewer concessions, especially if buildings and projects change hands,” he predicted.
– Margot Carmichael Lester
