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Thursday, Mar 28, 2024

Real Estate—Despite Slowdown, Office Building Sale Prices Rise

You know all those conflicting reports you’re hearing about the economy? Well, the real estate market is no different. While some sectors of the investment market have taken a dive, other property types are bringing near-record prices, according to a just-released report from Colliers International’s investment services group. Overall, pricing for office properties declined by about 5 percent in the first half of 2001, except on Class A properties, the Colliers report revealed. And while the news was somewhat better in the San Fernando Valley, for the most part the region followed the trends region-wide. “I think the Valley has done better than most people would have thought because there hasn’t been overbuilding, except in the West Valley,” said Michael C. Ross, managing director of the Colliers investment services group. “But the San Fernando Valley is a pretty good microcosm of Southern California.” The Colliers report does not break out statistics for the Valley in all categories, but it does highlight some measures for the area. According to the report, sales per square foot for Class A office space in the San Fernando Valley and Ventura County averaged $220 for the first half of 2001, versus $200 per square foot for the same period last year. The Warner Center Atrium, which is under contract according to the report, is likely to fetch about $208 per square foot with a capitalization rate, a measure of return on investment, of 9 percent. In Glendale, the Nestle building is receiving offers at $290 per square foot and another Class A office property at 801 N. Brand Blvd. went for about $240 per square foot, the Colliers report revealed. “We’re pretty close to replacement cost for those buildings,” said Ross. “In some cases it might be over replacement cost.” (Buyers typically seek properties priced below the cost to develop a building, but in areas where there is little opportunity for development or leasing, the offer prices may go higher.) The number of transactions was down throughout much of Southern California, but less so in the Valley, Ross said. “What’s been interesting is the Valley itself has had more transactions than it has had in recent years. (Owners) have done all the leasing they can. They got the properties in as good a position as possible and there has been strong interest by individual investors.” Colliers sees a broader recovery in the second half, as investors begin to look more realistically at the economic indicators. “I think the knee-jerk reaction to the Nasdaq and the technology issues has started to change,” said Ross. “We were in pretty good shape in the San Fernando Valley, but all of a sudden everyone was hit with bad news. When people get hit with bad news they stop and wait. They ask, ‘Should I spend money or cut back?’ And then you realize things are better than you thought.” Conexant Turnaround No, not a financial turnaround. The chipmaker is in pretty much the same shape that most semiconductor companies are in. But Newport Beach-based Conexant Systems Inc., which over the past few years expanded aggressively in the Conejo Valley, has subleased one of its facilities. Ventura Distribution Inc., a home video and DVD distribution company, is taking over the lease on a 50,811-square-foot R & D; building at 770 Lawrence Drive in Thousand Oaks. The company, which assumes the remaining 22 months on the lease, will consolidate three of its operations, employing about 60 people at the facility. Conexant reported a pro forma net loss of $220.4 million on revenues of $200.1 million for the quarter ended June 30. That compares with a net loss of $53.3 million on sales of $530.4 million for the same period in the prior year. The company as recently as April acquired a 43,600-square-foot facility in Newbury Park, and it purchased a 2.5-acre parcel for $1.6 million. John DeGrinis, senior vice president at Colliers-Seeley, represented Ventura and Conexant in the deal. Sweetheart Deal Revolution Studios has leased a 19,200-square-foot industrial facility in North Hollywood for prop storage and pre-production work. The entertainment production company, headed by Joe Roth, former head of Disney Co.’s motion picture division, signed a three-year deal at 13333 Sherman Way valued at $460,000. George Stavaris, a broker with Delphi Business Properties, represented the studio. Bill Kogel of TOLD Partners represented the property owner, Donald Marks. Launched about one year ago, Revolution recently produced “American Sweethearts.” Local ISP Expands ISWest, a business-to-business Internet service provider, has signed a 10-year lease for 10,000 square feet of office space at the Canwood Corporate Center in Agoura Hills. The 10-year lease is valued at $2.5 million. The company is expanding into the new server facility. Cal Trans Move The Conejo Spectrum, a 100-acre business park in Thousand Oaks, has a new tenant. The California Department of Transportation leased 7,000 square feet of office space in one of the complex’s buildings at 1525 Rancho Conejo Blvd. CalTrans is moving its Ventura County field office project engineers to the facility from Moorpark. Dan Sibson, a principal with Investment Development Services Inc., which developed the complex, represented the owner, Conejo Spectrum Building Associates LLC, along with John DeGrinis, Marc Spellman and John Sabourin at Colliers-Seeley. Duane Cody, a broker with Cushman & Wakefield, represented Cal Trans. Senior reporter Shelly Garcia can be reached at (818) 676-1750, ext. 14 or by e-mail at [email protected].

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