NORTH COUNTY – Moves From San Fernando Valley Spark New Building


Internal growth and migration from the San Fernando Valley fueled the North County industrial market in the first quarter.

The robust activity was not readily apparent from the market’s vacancy rate, which remained at 5.8 percent, unchanged from the fourth quarter 1999, according to CB Richard Ellis. That was due to new buildings hitting the market notably 108,867 square feet in four new buildings at Valencia Commerce Center rather than from a lack of tenant demand.

Indeed, tenants absorbed 305,264 square feet more North County industrial space than they vacated during the period, CB Richard Ellis reported.

New tenants at the Valencia Commerce Center include Spray-Tex, a manufacturer of spray paint equipment, which moved into 36,766 square feet of space during the first quarter, and Designing Health, a nutrition-bar maker, which moved into 18,201 square feet, said Senior Vice President Craig Peters with CB Richard Ellis.

That strong demand, coupled with the new buildings, pushed up the market’s average monthly asking lease rate by a penny for both size categories, to 57 cents per square foot for buildings 25,000 square feet or more, and to 63 cents per square foot for smaller buildings, Peters said.

Another response to the strong demand is that developers are moving rapidly to put up new industrial buildings. Projects totaling 397,000 square feet were under construction during the first quarter, and less than half of that uncompleted space (178,000 square feet) remains available. That’s a notable improvement from the prior quarter, when two-thirds of the uncompleted space was available.

Net absorption (the amount of space tenants moved into minus the amount of space they vacated) exceeded 1 million square feet last year in the North County industrial market. And since there’s only 800,000 square feet currently available, “to fill user demand, we’ll have to see new construction” this year, said Peters.

Developers’ preferred spot in the market is clearly Valencia, which has the attractive combination of low vacancy and plenty of developable land.

But industrial land prices last year increased faster than lease rates, so there will be less construction activity during the first half of the year, said Jim Linn, senior vice president with Grubb & Ellis Co. Some developers, he said, will sit on the sidelines waiting for lease rates to increase or land prices to decrease.

Two large industrial projects are slated to start construction within the next few months the 200,000-square-foot third phase of Vista Business Park, and the 300,000-square-foot Newhall Ranch Business Park. In addition, a 150,000-square-foot Sares Regis building broke ground in the fourth quarter. At this time last year, six large projects were beginning or about to begin construction, Linn noted.

Significant industrial leases during the quarter included a 63,716-square-foot deal by Bertelsmann Industries, a printing and distribution company that added a fourth building at Gateway Business Center, Peters said. Innovative Design Technologies, a manufacturer of video screens, leased a 33,429-square-foot space at the North Campus at Rye Canyon Business Park. It will move to Valencia from Burbank. And IW Industries, a maker of sink fixtures, purchased a 54,000-square-foot building in the Valencia Industrial Center, Linn said.

Meanwhile in the Valencia office market, the vacancy rates dropped to 31.4 percent, from 33.6 percent in the fourth quarter, according to CB Richard Ellis. Nearly all of that empty space is located in three projects: Valencia Corporate Point, a 177,156-square-foot building that is unoccupied; Explorer Business Center, which has 53,000 square feet available; and Tourney Pointe, with 147,321 square feet of its 218,000 square feet unoccupied.

“The market is really hot and developers built big product,” said Dave Solomon, a sales associate with CB Richard Ellis. But, he added, “the buildings anticipated demand that hasn’t happened yet.”

Because the buildings were designed to appeal to larger users, “it’s very likely they’ll be leased up in big chunks,” Solomon said.

Major leases this quarter included 8,500 square feet to TCast Communications, a telecommunications company, which signed a five-year deal at Valencia Town Center I, where it more than doubled its space. Psomas & Associates signed a five-year lease for 6,419 square feet at the Explorer Business Center. The engineering firm is expanding from Glendale.

“We’ve seen large tenants such as Princess Cruises and Cinetech move to Valencia; now we’re seeing the migration of mid-sized tenants as well,” Solomon said.

In Antelope Valley retail news, Lowe’s Home Improvement Centers opened a 128,532-square-foot store at The Marketplace at Palmdale. Also at The Marketplace, Ross Dress 4 Less signed a lease for a 30,000-square-foot store, which is expected to be built in time for the holiday shopping season, said Grooms.

The city of Lancaster received the top award from the California Redevelopment Association this quarter for its Foxfield Industrial Quarter, a 5,000-acre area set aside for warehouse and distribution facilities, anchored by Rite Aid Corp. and Michaels Arts & Crafts.

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