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Monday, May 23, 2022

SANTA CLARITA VALLEY: Cruise Line’s Impending Exodus Could Capsize Area’s Comeback

Usually there’s not much to say about a submarket absorbing 6,900 square feet of space, but in the Santa Clarita Valley that qualifies as news, especially as it reflects a slow recovery.

The office market still has a 23.1 percent vacancy rate – but that is more than a point lower than the fourth quarter and two full points lower than a year earlier, according to Jones Lang LaSalle Inc.

One high-profile deal in particular brightened the regional office market. The long-vacant Entrada Gateway Center, at 27770 N. Entertainment Drive, got its first tenant in Precision Dynamics Corp., which signed a seven-year lease for 44,000-square-feet of space. The maker of ID bracelets for health care and other industries is expected to build out part of the first floor and the entire second floor. It plans to take occupancy in the late third quarter.

The project, visible to 300,000 cars daily on the freeway, stalled at the height of the recession after the first of two four-story planned office towers was built by LNR Property Corp.’s Commercial Property Group of Newport Beach. It has been empty ever since, but will be nearly half-leased once Precision Dynamics moves in. The company, which acquired a rival last year, plans to consolidate its 250 employees at the new building. The employees are currently housed in Valencia and San Fernando.

That good news, however, could be muted as Santa Clarita-based cruise operator Princess Cruises vacates roughly 70,000 square feet late this year and early next year at Gateway Plaza, at 25360 Magic Mountain Parkway, said Ryan House, a vice president for the L.A. North market at Jones Lang LaSalle.

“Princess is going to give back that space. And even with these other deals where space has been leased, we’re likely to have a wash or just a little bit of positive net absorption this year,” House said.

What’s more, while rents looked on their way to bottoming out at $2.41 in the first quarter, Princess Cruises is marketing its space for sublease at $2 a square foot, which House said is pulling down rates overall.

Still, tenants in the valley are contemplating longer-term decisions rather than getting by on 12- or 18-month renewals as they have in recent years.

“I really think we’re past the contraction stage. A lot of the companies that have had to contract have already done it and they are now digging out and recognizing there’s an opportunity to make decisions moving forward on long-term occupancy,” House said.

MAIN EVENTS

  • A 264-unit condominium complex, the Madison at Town Center, sold in January for $56.7 million to Decron Properties Corp., a West L.A. real estate company. The seller was Prado LLC, a joint venture between homebuilder Lennar Homes Inc. and Regent Properties Inc. The Valencia complex, 24555 Town Center Drive, was built in 2003 and 95 percent occupied. Originally apartments, about half the units have been converted into condos as part of a phased ownership conversion.

  • Internet firm Scorpion Design Project picked up 3,300 square feet of additional space at 28480 Avenue Stanford in Valencia from landlord Pacific Office Properties of San Diego. The tenant, which added 4,500 square feet last fall and now has a total of 16,000 square feet, will move its expanding work force into the space sometime this quarter after improvements.

  • Dental company Implant Direct purchased a distressed, 21,000-square-foot building at 25106 Avenue Tibbitts in Valencia. The spec project, built in 2008 and never occupied, is part of the RiverCourt development in the Valencia Industrial Center. The building, in shell condition, sold for $125 a square foot out of bank ownership.

  • Five public interest groups filed suit against Los Angeles County in March over its approval in February of permits for the first phase of the 12,000-acre Newhall Ranch development along six miles of the Santa Clara River. The county approved an overall plan for the Newhall Ranch development in 2003 but construction of 21,000 housing units has been stalled by environmental lawsuits; acquisition of permits from the Army Corps of Engineers; and the bankruptcy of LandSource Communities Development, the project’s previous developer.

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