The Santa Clarita Valley’s office market saw some improvement last quarter, but few predict that the market is on any kind of long-term upswing.
Vacancies dropped two points to 21.1 percent as the valley absorbed 57,475 square feet since the first quarter, according to Jones Lang LaSalle Inc. That gave landlords the leverage to raise Class A asking rents by 2 cents to $2.43.
Much of that improvement can be attributed to Precision Dynamics Corp., a maker of hospital wristbands and other health care identification tags. It signed the market’s biggest office lease: a 44,000-square-foot deal that consolidated its Valencia and San Fernando offices into LNR Property Corp.’s Entrada building, premium office space at 27770 Entertainment Drive that has sat vacant since it came on line in 2009.
But Kevin Fenenbock, senior vice president at Colliers International, said that the Precision Dynamics deal is an outlier for the market, noting few, if any, new companies are moving to the area. Instead, the majority of lease deals are with valley companies that are consolidating to more economic spaces or upgrading.
“A lot of companies are not really in growth mode,” Fenenbock said. “They’re not downsizing anymore, but they’re not confident enough to be growing to the point of hiring more employees or expanding their space.”
In fact, one of the valley’s largest tenants actually reduced space last quarter. Princess Cruises vacated a total of 70,000 square feet at 25350 and 25360 Magic Mountain Parkway.
“You never know, but if I had a crystal ball I’d say that it probably won’t fill for a while,” Fenenbock said.
Ryan House, vice president at Jones Lang, said he also doesn’t expect too many other companies to follow Precision Dynamic’s lead.
“There has not been a big demand for large lots,” said House, who like Fenenbock, expects the market to remain relatively flat for the foreseeable future.
The biggest commercial real estate sale of the quarter was for the 156-room Embassy Suites Valencia Hotel at 28508 Westinghouse Place. Clearview Hotel Capital LLC in Newport Beach bought the property for $19.6 million in May from Cerberus Capital Management LP and Chatham Lodging Trust.
– Yasmeen Al-Shawwa
Precision Dynamics, a company that makes health care identification products, signed a 44,000-square-foot lease at LNR Property Corp.’s 27770 Entertainment Drive. The firm consolidated and relocated its 250 employees to the first and second floors of the building. The four-story structure is the first of two 100,000 square-foot buildings that LNR plans on the property.
Sinanian Development began preleasing for its 100,000-square-foot medical office building at 17901 Soledad Canyon Road in May. The property has been under reconstruction since the company purchased it out of foreclosure about 18 months ago.
Three companies leased a total of 10,250 square feet at Arden Realty’s 27200 Tourney Road, pushing the Class A office building’s occupancy up to 85 percent. Public accounting company Miod & Co. took 3,700 square feet, software company P&C Claims leased 2,350-square-feet and accounting-consulting firm King King Alleman & Jensen took 4,200 square feet.
The U.S. General Services Administration leased 10,000 square feet at 26415 Carl Boyer Drive, a 41,000-square-foot office building owned by Spirit Properties.
Clearview Hotel Capital LLC in Newport Beach bought the 156-room Embassy Suites Valencia Hotel for $19.6 million from Cerberus Capital Management LP and Chatham Lodging Trust. The new owner may make improvement to the 28508 Westinghouse Place hotel, which was built in 2007.