By WADE DANIELS
The news about the San Fernando Valley’s tightening real estate market during the first quarter had less to do with the tightening itself, and more with the dilemmas it has brought for brokers and businesses.
“It’s pushed us into decisions we’ve never had to make before,” said Forrest Blake, senior broker with the Travers Realty Corp.
Tenant representatives, for example, have been leasing more space than is needed to ensure that the client has enough growth room.
“We’re in a position where if we don’t lease the extra space now, it’s probably not going to be there when we need it, especially for larger spaces,” Blake said.
“A couple of years ago there were 10 options for someone looking for 30,000 square feet, and now there are three options. It’s never been like this,” he said.
The San Fernando Valley’s 11.9 percent average office vacancy rate is down from 12.3 percent in the fourth quarter of 1996, according to Grubb & Ellis Co.
The West Valley saw 89,475 square feet of office space absorbed in the first quarter, compared with 57,833 in the Central Valley and a negative absorption of 11,936 in the East Valley.
Negative absorption occurs when more space comes on the market than is leased. In this case, the negative absorption is believed to be a temporary phenomenon since demand has been so high.
“The overall activity in the Valley is up strongly in the first quarter,” said Tom Festa, senior associate for Grubb & Ellis in Sherman Oaks. “All my friends in the office market are so busy they don’t know what to do.”
Blake, Festa and their counterparts are mostly pulling their hair over the East Valley. Even though the office vacancy rate there inched up to 6.0 percent in the first quarter from 5.8 percent at the end of last year, this is equivalent to a full market, brokers say. And entertainment companies such as Burbank-based Walt Disney Co. are continuing to take over leases in an attempt to get more space.
In one first quarter episode, Disney offered to let Financial Indemnity Corp. out of a long-term lease in its Disney Channel building so it could take over its 50,000 square feet of office space.
Financial Indemnity took the deal, and leased 55,000 square feet in Warner Center’s Plaza III building in Woodland Hills.
But with a 15.2 percent vacancy rate in the first quarter (down from 16 percent in late 1996), the West Valley has plenty of space still available.
The absorption rate in the West Valley continued to be “fairly stable and consistent” in the first quarter, and if it remains so this will lead to a “much more solid market” after about 18 months, said Jim Lindvall, associate vice president of Grubb & Ellis in Sherman Oaks.
In the retail arena, the increasingly familiar refrain about a return of the 1980s was repeated by Allen Young, a broker for the CB Commercial Real Estate Group in Sherman Oaks.
Young is the agent for a number of retail developments throughout the Valley which he said have had little problem attracting small and large tenants alike.
“There’s a pent up situation for businesses looking for new shopping centers, because as exposure starts and word of a center gets out we start getting calls,” said Young, who is broker for projects including the 200,000-square-foot Granada Hills Town Center and L’ Plaza d’ Northridge, both of which saw ground breaking in the first quarter.
The Granada Hills center is set to feature Orchard Supply Hardware, Office Max, Long’s Drugstores and a Ralphs supermarket, while the smaller Northridge facility, at the corner of Plummer and Shirley streets across the street from the Northridge Fashion Center, will be anchored by a Gelson’s Market and a Linens ‘N Things.
“We’re back to where we were in the early and mid 1980s where businesses are calling us rather than us having to call them,” said Young.
Still on a downward trend from better times in the 1980s is the apartment investment market, said Scott Miller, a senior associate with CB Commercial. The market is still largely driven by foreclosures, he said, but the first quarter saw some indication that the rate of forfeits is slowing.
“In the bread and butter markets, (foreclosures) have tapered to an extent where we can see the return of the conventional seller who has had to compete with so many forced sales at lower prices,” Miller said. “That market, which is mostly 1960s-built buildings in rougher areas is still pretty soft, but the conventional transactions should start coming back more.”
– Sprint Communications Inc. signed a lease for a 50,000-square-foot space in Burbank’s Flower Street Business Park. Travers Realty Corp. was the broker.
– Financial Indemnity Corp., an insurance company, took an offer from Walt Disney Co. to take early leave of its lease of 50,000 square feet in the Disney Channel building. It moved to the Warner Center’s Plaza III in Woodland Hills where it leased 55,000 square feet.
– Public Storage Corp. leased 47,500 square feet of industrial space in Chatsworth. Pacific Property Consultants was the broker.
– Developer J.H. Snyder Co. broke ground on a 200,000-square-foot shopping center called the Granada Hills Town Center.
– The Seidenglanz family broke ground on a 120,000-square-foot shopping center called L’ Plaza d’ Northridge on land owned by the family.