Companies will be digging a lot deeper into their pockets as they renew office leases in the greater San Fernando Valley area. Rents for the third quarter in class A office buildings have jumped 6 percent overall throughout the greater Valley compared to the same period last year, with some submarkets seeing double digit increases, according to a just-released report by Grubb & Ellis. The average asking rent in the third quarter was $2.48 per square foot in the Valley, up from $2.41 per square foot in the second quarter and $2.33 per square foot in the third quarter of 2005. But a number of submarkets saw far larger rent increases. Rates for class A office space in Santa Clarita jumped 15 percent to an average asking rate of $2.82 per square foot. In the East Valley, rents rose 11 percent to $2.85 per square foot, and in the Central Valley rates jumped 9 percent to an average $2.49 per square foot, the Grubb & Ellis report revealed. In Conejo Valley, where rents rose a comparatively modest 7 percent to an average $2.42, the relative bargains are not likely to last long. New construction in Conejo is going out at $2.85 per square foot, and an office complex now under construction is scheduled to open with rates of $3.05 per square foot, brokers said. “We were at record levels at $2.85 and when we achieved it, everybody bumped up a lot,” said Tom Festa, a broker with Grubb & Ellis. New construction, which reflects dramatic price increases in raw materials and land over the past several years, is providing a benchmark for landlords of existing buildings, and they are raising those rates as well. But more than the newly constructed buildings, sheer supply is driving rental rates up for office properties. The vacancy rate for office properties in the third quarter shrunk to 6.3 percent, making the region the tightest submarket in Los Angeles. The East Valley registered the tightest supply, with a vacancy rate of 3.2 percent, and the Central Valley was close behind at 4.0 percent. The West Valley had the highest vacancy rate in the region, 9.2 percent, and that has kept asking rents to a comfy $2.36 per square foot. But chances are tenants won’t find relief in the West Valley for much longer. Aware of several large vacancies in its West Valley properties, Douglas Emmett, has kept rents in its buildings down. But two things are likely to change that. First, Douglas Emmett owns a majority of class A properties in the West Valley, and most of the available office space. As one broker told me, “Douglas Emmett is starting to figure out that they are the only ones with vacancies, so they can raise the rents.” Second, the company is poised to begin trading on the New York Stock Exchange this week, and a rent increase can only boost its income, and help to attract attention on The Street. Lee Opens Third Location Lee & Associates-LA North/Ventura, is opening its second office in as many years in Oxnard. The office joins the Calabasas location, which opened in 2004, and the company’s original North L.A. office in Sherman Oaks. The team of Grant Harris and John Ochoa are joining the brokerage as principals and founding partners of the Ventura shop, and David Kim joins as an associate. All came from Colliers International, where Harris has worked since 1989 and Ochoa has worked since 1996. “When I took over Lee in January, 2004, the company was operated out of Sherman Oaks only,” said Mike Tingus, president of the LA North/Ventura operation. “We had 16 brokers. We’re up to 44 brokers now between the two offices.” The company has tripled its revenues in three years, Tingus said. Lee’s Sherman Oaks office handles Central and East Valley markets and Valencia. The Calabasas office handles the West San Fernando Valley along with Simi and Conejo valleys. The new Ventura location will cover the Santa Barbara and Ventura county markets. Tingus noted that the region still has about 200 acres of developable land, and the company already has business contacts in the region through Bob Flink, a veteran agent who works out of the Calabasas office. By next year, Tingus said he expects to have some 10 or 12 brokers stationed in the new facility. Multifamily Sale StarPoint Properties has purchased a portfolio of 10 multifamily properties mostly located in the North Valley with plans to spend about $5.3 million on renovations. The purchase, for $86 million, includes one building in Granada Hills, two in Van Nuys, three in North Hollywood and three in Canoga Park. The remaining building is located in Los Angeles. The purchase of the class B and class C buildings by a major real estate company is somewhat unusual. Until now, most companies like StarPoint have eschewed economically marginal and low-income communities for neighborhoods like Encino or Woodland Hills. The company expects that rents in the properties will increase by about 28 percent following the renovation. Senior reporter Shelly Garcia can be reached at (818) 316-3123 or by e-mail at [email protected] .
