Mixed Results for Vast Market As Sales, Leasing Activity Slow
By DAVID GEFFNER
Contributing Reporter
Falling vacancy rates and steady Class-A asking rents combined to inject signs of life into an otherwise quiet third quarter in the San Fernando Valley.
Vacancy rates were 12.8 percent in the July-September period, down from 13 percent in the second quarter and 15.3 percent in the like period a year earlier, the largest annual decline of any submarket in L.A. County.
Class-A asking rents in the Valley held steady at $2.18 per square foot.
Overall, net absorption in the Valley was positive by 54,137 square feet, well off from the second quarter high of 390,563 square feet.
The tightest market continues to be the Central Valley, encompassing Van Nuys, Northridge and Encino, where vacancy rates stood at 10.8 percent, up from 10 percent in the previous quarter. At $2.06 per foot, asking rates have held steady from $2.07 in the prior three months
The greatest gain over the last 12 months has been in the far western section of the market, where vacancies in the Canejo Valley fell by a quarter from the levels of a year ago.
The decline in Canejo Valley vacancies, to 13.8 percent from 15.4 percent in the April-June period and 18.1 percent in the year earlier, was spurred in part by asking rents that have fallen to $2.20 per foot, a 7 cent decline over the last 12 months.
Feeding the activity in the Central Valley was the 10-year, 130,000-square-foot expansion and renewal deal signed by La Brea Bakery at 15963 Strathern St. in Van Nuys. The $11 million lease doubled the bread maker’s space in the building.
On the sales side, Encino Executive Plaza, a 174,744-square-foot building at the northwest corner of Ventura Boulevard and Hayvenhurst Avenue, was acquired for $37.2 million by investor group 16501 Ventura LLC from Encino Executive Plaza LTD.
Reseda Center Associates LLC snapped up a 39,223-square-foot retail site anchored by Coco’s Restaurant at 9361 Reseda Blvd. in Northridge from Beta West for $5.7 million.
Yet another high-profile deal expected to play out in the next quarter is the sale of Carlton Plaza, a 153,000-square-foot Class-A office building on Ventura Boulevard in Woodland Hills. Crown Realty & Development, which purchased the building in July 2002 for $21.5 million, put the property on the market a year later.
Bob Safai, president of Madison Partners, which is marketing the site, said Crown had improved occupancy to 94 percent from 70 percent at the time of its purchase. Madison is asking for between $28 million and $29 million for the building. Robert Flaxman, president and chief executive of Crown Realty, said the deal carried “$19 million in assumable financing” at rates lower than now available, which he anticipated would help spur a deal.
The submarket also accounted for 179,336 square feet under construction in the third quarter, nearly half of which coming from LNR Warner Center, which has the potential for 520,000 square feet of future build-outs.
Significant Conejo Valley lease deals came in Aetna Insurance’s lease renewal for 34,000 square feet at less than $2 per square foot in Newbury Park, and biotech firm Ceres Inc. inking for 46,000 square feet of office space at the Conejo Spectrum, also in Newbury Park.
Shea Homes will be moving its headquarters to the Westlake North Business Park at 30699 Russell Ranch Road in Westlake Village as part of a deal there for 13,948 square feet.
Kennedy-Western University, based in Agoura Hills, was set to close on 35,000 square feet in the upcoming fourth quarter.
As in other parts of the county, low interest rates spurred a fair amount of activity.
In the traditionally strong West Valley, the Klein Family Revocable Trust bought Porter Ranch Shopping Center, at 19300 and 19344-19363 Rinaldi St, from Doerken Properties for $15.5 million. The fully leased 54,668-square-foot retail center is anchored by Whole Foods, whose site was not part of the sale.
Thomas Bohlinger, a senior vice president at CB Richard Ellis, noted that there is plenty of capital floating around. “It’s just difficult to find properties over all the submarkets,” he said. “Tenant deals are still aggressive and sellers are not willing to give up buildings (at prices attractive to investors).”
Rents in the West Valley submarket, comprised of Warner Center and Calabasas, spiked by 3 cents, to $2.22 per square foot, from the last quarter, though they were still off from the $2.49 asking rate of a year ago.
David Solomon, a vice president at CB Richard Ellis, described West Valley rents as “fairly aggressive.”
“Landlords are offering free rent in select locations,” he said, “although not as much as in past quarters.”
Major Events:
– La Brea Bakery signed a 10-year lease expansion and renewal for 130,000 square feet at 15963 Strathern St. in Van Nuys valued at $11 million.
– Encino Executive Plaza, a 174,744-square-foot building at Ventura Boulevard and Hayvenhurst Avenue, was acquired for $37.2 million by investor group 16501 Ventura LLC from Encino Executive Plaza LTD.
– Crown Realty & Development listed its 153,000-square-foot Carlton Plaza in Woodland Hills for as much as $29 million. It purchased the building in July 2002 for $21.5 million.
– Shea Homes will move its headquarters to 13,948 square feet at Westlake North Business Park on Russell Ranch Road in Westlake Village.
