The already tight Santa Clarita Valley office and industrial markets were cinched even further in the third quarter as demand from a rapidly growing population base raced ahead of the available building supply.
“What we’re seeing now is the transformation of the Santa Clarita Valley from a bedroom community into a more typical suburban market,” said Bert Abel, senior vice president with Grubb & Ellis Co.
That means more competition for land from residential and retail developers, which has driven some industrial activity to the Antelope Valley.
Office vacancies in the Santa Clarita Valley fell slightly in the third quarter, to 9.2 percent from 9.3 percent in the previous three months and 12.1 percent for the like period a year earlier, according to Grubb & Ellis.
The industrial vacancy rate fell to 7 percent from 8.4 percent in the second quarter.
“This is the tightest market in the north and central San Fernando Valley and environs,” said Jim Lindvall, senior vice president with Grubb & Ellis. (Figures for the Antelope Valley cities of Lancaster and Palmdale were not available.)
For the first time, the asking rent for Class- A office space in Santa Clarita cracked the $2 barrier, hitting $2.04 per square foot in the third quarter versus $1.98 in the second.
Several new commercial and industrial projects coming on line in the next several months are not expected to provide relief, Lindvall said.
The Fairway Business Park and the Summit Corporate Center both broke ground earlier this summer. Between them, they will have 10 buildings totaling 225,000 square feet, which would represent a 15 percent increase in the overall total rentable square feet in the Santa Clarita Valley.
Also, Opus West purchased land in the Valencia Corporate Center and plans to break ground this quarter on two three-story office buildings totaling 154,000 square feet. Completion is set for third quarter of 2005.
Because there was so little available space, net absorption of office space was a mere 9,652 square feet, down from 17,462 square feet in the April-June period.
At the Summit business park in Valencia, KB Home leased 29,000 square feet for a regional office and Barrister Executive Suites leased 25,000 square feet. Option One Mortgage Corp., a division of H & R; Block, leased 21,000 square feet at Tourney Place.
Industrial migration
One of the largest industrial deals was Argenbright Security Services’ lease of 93,000 square feet at Valencia Commerce Center. In the same development, light manufacturer King Bros. Industries leased 75,000 square feet for seven years in deal valued at $1.6 million.
Rising land prices have started a new trend: companies migrating from the Santa Clarita Valley to comparatively cheaper locales up the 14 Freeway in Palmdale and Lancaster.
“People who own industrial buildings in the Santa Clarita Valley built them years ago and bought their land for maybe $3 a square foot,” Abel said. “Now industrial property goes for $12 a square foot or even more.”
Regent Aerospace, which is based in the Valencia section of Santa Clarita, is building a 75,000-square foot facility in a business park next to the Fox Airfield in Lancaster.
More than 1 million square feet of industrial space either has been completed or is under construction in Lancaster alone, with hundreds of thousands of square feet also being built in Palmdale.
One trend is the building of industrial condos, where a manufacturing company owns the building but not the land around it, according to Vern Lawson, marketing and economic development manager for the city of Lancaster.
Several new retail projects either broke ground or reached completion during the third quarter in the Santa Clarita and Antelope valleys.
Among them: 618,000 square feet of mostly retail space at Golden Valley Ranch that will include Target, Lowe’s Home Improvement and Kohl’s stores; and the 155,000-square foot Gateway Village at the corner of Newhall Ranch Road and Rye Canyon, which will be anchored by L.A. Fitness, California National Bank and Smart & Final.
Also, a Wal-Mart store is set to open in the next few weeks across the street from the new Gateway Village.
Meanwhile, in the Antelope Valley, an old Sears is being converted into a Lowe’s Home Improvement store at the corner of K and 10th streets; it’s set to open by the end of this year.
