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Thursday, Mar 28, 2024

Warner Center Activity Lifts Sagging San Fernando Valley

If you want to know where all the action took place last quarter in the San Fernando Valley office market, just look west. The Valley’s corporate center saw 229,700 square feet of space absorbed, pushing its vacancy rate down 1.6 points to 17 percent, the lowest since 2011, according to data from Colliers International. No single lease accounted for the activity, but lots of smaller firms taking space really added up, according to area brokers. “It’s really the small businesses starting to blossom,” said Jeff Albee, senior vice president at the Encino office of Colliers. “I think it’s an overall effect of the economy. A lot of businesses are finally feeling confident enough to expand.” Although it didn’t directly affect the bottom line, the market also got a boost in May when insurance giant Farmers Insurance Group announced that it will be moving its headquarters from Wilshire Boulevard to Warner Center, slowly gobbling up other tenants’ leases at 6301- 6303 Owensmouth Ave., where it already leases most of both buildings. But the gains didn’t extend to all areas of the Valley. Both the Central and East Valley gave back space, and as a result the Valley as a whole showed only modest improvement. The vacancy rate fell a fraction of a point to 16.5 percent since the first quarter, according to data from Colliers. Still, asking rents valley wide edged up 2 cents to $2.23 a square foot. And the increases, Albee said, are likely to continue. “We’re still seeing some concessions, but landlords are starting to push back on that,” he said. “But it’s still a good move for a lot of companies. In Santa Monica or other areas of the Westside, they might pay $4 a square foot.” And as the Valley continued to creep toward recovery, investors also eyed the office market. In May, Adler Realty Investments Inc. paid $80 million to acquire the 410,855-square-foot, 13-building property known as Warner Center Corporate Park from Equity Office Management Inc. in the largest office sale of the quarter for the San Fernando Valley. The theme of modest improvement also was true of the local industrial market. The vacancy rate dropped two-tenths of a percentage point to 3.5 percent from the first quarter. Rents varied widely by area – and proximity to highways. In the West Valley, landlords asked 59 cents a square foot – one cent more than the previous quarter – while in the East Valley the average asking rent was 72 cents a square foot. That rent was the highest for the area, but 2 cents lower than in the first quarter. The typically strong East Valley industrial market – close to transportation arteries – accounted for most of the upward movement. New York theater production and merchandising company Araca Group inked a lease for 65,025 square feet of space at 459 Park Ave. in San Fernando in the largest square-footage industrial deal of the quarter. The length of the lease is five years, and financial details were not disclosed. “Entertainment has stayed strong, aerospace has stayed strong,” said Chad Gahr, vice president at NAI Capital Inc.’s Encino office. “And it’s just really tight in the East Valley. The tide is shifting toward the landlords. They’re charging higher rents with fewer concessions.” Gahr added the quarter wasn’t punctuated by many large leases or sales, but rather deals on spaces of 10,000 to 15,000 square feet. There were a few high dollar sales. The largest was Los Angeles real estate investment firm Rexford Industrial LLC’s acquisition of Glendale Commerce Center from Australian developer Dexus Property Group in April. The seven-building property came with a whopping $56.2 million price tag. – Kelly Goff Main Events – Farmers Insurance Group announced that it will make its Woodland Hills offices its new headquarters over the next five years, and plans on slowly taking up the entirety of two buildings at 6301-6303 Owensmouth Ave. as other tenants’ leases expire. The company currently leases 419,787 square feet of space between the two buildings, but plans to eventually lease all 568,913 square feet. – Los Angeles real estate investment firm Rexford Industrial LLC acquired the seven-building, 473,345-square-foot Glendale Commerce Center from Australian investment firm Dexus Property Group for $56.2 million in April. – Adler Realty Investments Inc. acquired Warner Center Corporate Park, a 13-building property comprised of mostly Class A office space, in May for $80 million from Equity Office Management LLC. u New York theater production and merchandising firm Araca Group signed a lease in April on 65,025 square feet of industrial space at 459 Park Ave. in San Fernando. – In one of the biggest industrial sales in the Valley in the quarter, Orange County flooring manufacturer MS Industrial Inc. acquired an 85,000-square-foot industrial building at 9111-9201 Sunland Blvd. in Sun Valley. Price was not disclosed.

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