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Thursday, Mar 28, 2024

REAL ESTATE QUARTERLY: Rare Rise for Vacancy Rate; Sales Activity Up for Smaller Properties

-San Diego-based developer Fairfield Residential will begin construction in December on Warner Place, a 540,000-square-foot residential, retail and office complex at 21221 Oxnard St. in Woodland Hills. Original developer Associated Estates Realty Corp. of Richmond Heights, Ohio was acquired by Brookfield Asset Management in August; Fairfield is Brookfield’s multifamily platform, said Larry Scott, Fairfield Residential senior vice president. He noted that Fairfield Residential developed and manages two Woodland Hills apartment complexes. -Barrister Executive Suites Inc. has renewed its lease for 17,300 square feet at the Encino Gateway at 15760 Ventura Blvd. The company rents office suites and meeting rooms to corporate users in Los Angeles and San Diego. -Nestle USA sold a 190,000-square-foot manufacturing facility at 9601 Canoga Ave. in Chatsworth to Synear Food Holdings Ltd. of Zhengzhou City, China, for $15.9 million. Synear makes frozen Chinese dumplings and was a supplier to the 2008 Beijing Olympics. Nestle sold the facility because it moved production of its Hot Pockets out of state last year. -Securities brokerage Merrill Lynch & Co. has renewed its lease for 16,500 square feet at Encino’s First Financial Plaza, 16830 Ventura Blvd. -A three-building property totaling 7,200 square feet in Studio City sold to Standard Home Lending, a mortgage firm, for $2.55 million or $354 a square foot. The buildings, at 3751-3759 Cahuenga Blvd., are partly occupied by a television production company, and the buyer will occupy the remainder as an owner-user. The San Fernando Valley office market gave back more than 100,000 square feet in the third quarter, and the region’s overall vacancy rate rose for the first time in nine quarters. But movement was incremental and might not signal a negative trend, brokers said. The vacancy rate across the Valley hit 15 percent this quarter compared with the second quarter’s 14.5 percent, according to data from the L.A. office of Colliers International. “There’s been a lot of growth and positive absorption over the last several years,” said Kevin Fenenbock, senior vice president in Colliers’ North L.A. office. “I don’t think we’re headed in the other direction.” The East Valley submarket led the region with 72,000 square feet absorbed and vacancy dropping nearly three percentage points to 11.6 percent. Although East Valley rental rates are the highest in the region, they have remained steady at $2.31 a foot for more than a year, according to Colliers data. Rental rates in the Valley’s central submarket also remained flat, at $2.13, and the market gave back almost 14,000 square feet. Most of the negative absorption occurred in the West Valley, where Bank of America moved out of Corporate Pointe, at 8521 Fallbrook Ave. in West Hills, leaving behind a 108,000-square-foot vacancy. Rates there remained flat at $2.19. The Valley saw increased sales activity, with nearly 40 small office buildings changing hands. Roger L. Beck, senior managing director in the Sherman Oaks office of Charles Dunn Co. Inc., said demand from owner-users has increased dramatically. “Anytime we see a small office building go on the market, there are five to 10 calls from people who have got financing and are ready to close. The sales prices have increased between 5 and 15 percent over the past two quarters,” Beck said. One transaction handled by Beck’s colleague, Senior Managing Director Stacy Vierheilig-Fraser, illustrates the trend. Last month, she sold a three-building property totaling 7,200 square feet in Studio City to Standard Home Lending, a mortgage firm expanding from 13223 Ventura Blvd. The parcel, at 3751-3759 Cahuenga Blvd. in Studio City, sold for $2.55 million or around $354 a square foot. “The property was 50 percent occupied by a television production company,” said Vierheilig-Fraser. “The buyer plans to occupy the remaining space as an owner-user.” The industrial market experienced a familiar problem in the quarter, with activity slowing due to lack of inventory, particularly in the central submarket, where the vacancy rate remained at an impossibly tight 0.1 percent. “There are many older buildings that are 100 percent occupied with wholesale-related tenants who draw on the Valley’s huge labor force and easy freeway access,” said Patrick DuRoss, vice president in Colliers’ Encino office. Perhaps the most active segment of the market was multifamily residential. For example, broker Dean Zander and his partner Vince Norris at Berkadia closed seven Valley apartment sales in the quarter for a total of almost $111 million. – Karen E. Klein

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