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Thursday, Mar 28, 2024

Year Starts Off With Whimper, Brokers Hope for Bang Later

If you listened carefully, you could hear a pin drop in the Santa Clarita Valley office market in the first quarter. Leasing was at a near standstill, with just 19,800 square feet of transactions during the quarter, and a net absorption of just 600 square feet. The vacancy rate remained flat at 17.1 percent, as did asking rents at $2.35 a square foot, according to data from Colliers International. But with 102,100 square feet of space under construction, brokers are hoping – and expecting – the market to pick up in the second quarter. “What we’re seeing is the spaces are being taken by smaller companies: law firms, CPAs, really service-oriented companies,” said Kevin Fenenbock, senior vice president at Colliers’ Encino office. “And really, it helped that a few buildings were sold to owner-users who took some space off the market.” With vacancy rates in the San Fernando Valley falling, Santa Clarita could see some overflow, and that could help. But the largest Santa Clarita office deal in the first quarter was an acquisition. Heitman LLC of Chicago purchased Summit Oaks, at 28515 Westinghouse Place in Valencia for $33.6 million in February, as part of a $543 million portfolio sale. The building, built in 2008, is 100 percent leased by medical device company Advanced Bionics LLC through 2019. Overflow from the San Fernando Valley may also boost the industrial market, but brokers who make deals in the area note that a few new sublease openings may mean the market will struggle in the next few quarters. AMS Fulfillment Inc., a major distributor that has occupied several 100,000-square-foot buildings in Valencia and Santa Clarita, recently lost a contract with TOMS Shoes, and is now looking to sub-let spaces. “Historically, we have not been a market to take a couple of buildings off the market at once,” said John DeGrinis, executive senior vice president of the Encino office of Colliers. “So this time it might be tough. We’re a thin market up there, and there aren’t a lot of companies competing for space.” And that’s reflected in the rents. In the second quarter, the industrial vacancy rate fell four tenths of a percentage point to 4.1 percent, and asking rents were the lowest in the Business Journal’s coverage area, at just 40 cents a square foot, according to Colliers. But there have been some acquisitions. In one the quarter’s largest deals, Lake Forest firm MMB Management LLC acquired a 165,141-square-foot industrial property at 29011 Commerce Center Drive in February. Price was not disclosed. Valencia and Santa Clarita are home to newer, brighter industrial buildings than the San Fernando Valley that have amenities – like high ceilings and loading docks – that distributors like, and, say some brokers, that makes the area an attractive option for firms looking to expand or buy their own buildings. The area also doesn’t face the transportation challenges of the Conejo or Simi/Moorpark submarkets. With the Golden State (5) Freeway bisecting the Santa Clarita Valley, distribution companies can save money and still be near a major thoroughfare. Chad Gahr, a vice president at NAI Capital Inc.’s Encino office, said part of the reason the market in Santa Clarita has been slow is that tenants are looking to buy, but few landlords are willing to sell. “You do see some absorption, and you have some impetuous to buy, but landlords haven’t been willing to sell, and it’s created kind of a stalemate for some buildings,” he said. “But for companies looking to expand, it’s an attractive option. You’re still only adding 20 minutes to distance to the port, and in the Valley, everything’s built up.” – Kelly Goff Main Events Summit Oaks, at 28515 Westinghouse Place in Valencia, sold for $33.6 million in February, as part of a $542.8 million portfolio sale to Heitman LLC of Chicago. The building, built in 2008, is 100 percent leased by medical device company Advanced Bionics LLC through 2019. Flex property 28348 Constellation Drive, Unit A-7 sold for $763,420 in January. The unit is part of the Discovery Gateway Spectrum II office/industrial complex that was started in 2007. 24640 Wiley Canyon Road sold in February for $4 million. The 55,565-square-foot property, which is 100 percent leased to Santa Clarita Athletic Club, was sold out of foreclosure by Chicago Title Co. In one the largest square-footage deals of the quarter, Lake Forest firm MMB Management LLC acquired a 165,141-square-foot industrial property at 29011 Commerce Center Drive in a February deal. Price was not disclosed.

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