Recession Stems Migration of Companies From L.A.
By DAVID GREENBERG
Staff Reporter
With recession-weary businesses halting plans to relocate from L.A., Ventura County’s commercial real estate market continued its fall during the fourth quarter.
The office vacancy rate rose to 12.7 percent from 12 percent in the third quarter and 9.5 percent in the fourth quarter of 2000, according to CB Richard Ellis.
“It was already slow before Sept. 11. All (the attacks) did was exacerbate the situation,” said Gerald Pelton, a CB Richard Ellis managing director. “When you have a traumatic experience occur, the last thing people want to do is make long-term business decisions.”
East Ventura County, where many businesses from the San Fernando Valley and downtown Los Angeles migrate in search of better schools and air quality, was hit particularly hard. That submarket’s office vacancy rate rose to 14.1 percent, from 11.8 percent in the third quarter, and net absorption fell to 57,626 square feet, down from 150,796 square feet in the year-earlier quarter.
A lot of the hurt was caused by the dot-com meltdown. Projects completed during the fourth quarter had begun their lengthy development process two or three years ago, during a solid economy. By the time they came on line, market conditions had deteriorated.
“You can’t stop the hammer going once you’ve got it going,” said Tony Principe, vice president Westcord Commercial Real Estate Services. “Sept. 11 really just stalled the market for a good three to four months. No one wanted to do anything. Frankly, there are still some buildings that are sitting vacant.”
Brokers are shooting for more traditional businesses to fill the space, such as law and insurance firms and biotech companies.
Full service gross office rents on which the landlord pays for property’s taxes, maintenance and insurance averaged $2.25 to $2.50 per square foot, monthly, in the East County for the fourth quarter, and about $1.85 in the West County submarket.
Sales action
As usual, a large share of the fourth-quarter activity came from building sales. That’s because the area tends to attract small- and medium-size companies looking for permanent homes, rather than Fortune 500 companies, which generally prefer to lease.
Among the major sales in the quarter:
Topa Equities Ltd. in November paid $20.4 million to acquire the 77,917-square-foot Westlake Plaza III office building at 2815 Townsgate Road in Westlake Village.
SIMA Management Corp. in December bought three office buildings totaling 103,719 square feet for $13.8 million in the Thousand Oaks Financial Plaza at 195, 275 and 325 E. Hillcrest Drive.
Sebastian Hair Care Products in December bought the 69,069-square-foot Guitar Center building at 5795 Lindero Canyon Road in Westlake Village for $9.8 million.
At $261.82 per square foot, the Topa Equities deal was by far the most lucrative sale of the quarter, the culmination of three years of planning by Westcord.
That brokerage initially handled the sale of the 1.5-acre site to Plaza III Partners, which then developed the office building. Westcord was retained as leasing agent for the building, and brought it to 85 percent occupancy before selling it to Topa (business magnate John Anderson’s investment firm).
Meanwhile, Ventura County’s industrial sector held up relatively well during the quarter. Its vacancy rate inched up to 8.2 percent, essentially unchanged from 8.1 percent in the three months.
Since industrial projects can be planned and constructed in only eight months, developers had an easier time putting on the brakes last year. Only 200,000 square feet of new industrial space came on line last quarter, a fraction of the 500,000 to 1 million square feet hitting the market each quarter during the booming mid- to late 1990s.
The average asking monthly lease rates for research-and-development buildings and warehouses remained flat in the fourth quarter 60 and 80 cents per square foot, respectively, in the East County, and 45 and 70 cents in the West County.
Perks to entice
In lieu of direct rent relief, landlords offered a variety of “fringe benefits” to entice tenants, such as an extra month free rent, no-cost tenant improvements and interior paint jobs.
“There were more giveaways and concessions than nine months ago they can come in many forms,” said Paul Farry, a CB Richard Ellis senior vice president. “But the underlying base rates have not eroded.”
In one of the few major sales during the fourth quarter, Countrywide Home Loans in October purchased the former headquarters of defunct Bugle Boy Industries Inc. for $16.5 million.
Major Events:
-Topa Equities Ltd. purchased 77,917-square-foot Westlake Plaza III at 2815 Townsgate Road in Westlake Village.
-Countrywide Home Loans purchased the former Bugle Boy Industries headquarters facility at 2900 and 2950 Madera Road in Simi Valley.
-SIMA Management Corp. bought three office buildings totaling 103,719 square feet for $13.8 million in the Thousand Oaks Financial Plaza.
-Sebastian Hair Care Products bought the 69,069-square-foot Guitar Center building for $9.8 million at 5795 Lindero Canyon Road in Westlake Village.
