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Thursday, Mar 28, 2024

REAL ESTATE QUARTERLY: Lower Prices, Large Spaces Draw Tenants From Nearby Areas

-Logix Federal Credit Union is building a 170,000-square-foot headquarters on a vacant 12-acre parcel at the Valencia Commerce Center. The company is relocating its long-time Burbank headquarters to the facility, which it purchased from LNR Gateway V for an undisclosed price. It is slated to move in 2018. -New York investor True North Management Group bought the Valencia Corporate Plaza for $41.3 million, or about $212 a square foot, from Angelo Gordon & Co. and Pacific Office Properties Trust Inc. in September. The 194,400-square-foot, three-building office complex on the 28400 block of Avenue Stanford last sold for $31 million in 2011. -One Properties in Los Angeles bought a 51,385-square-foot industrial property from Sierra Square in Cupertino for $14 million, or about $272 a square foot. The sale in July was the highest-price industrial sale in Santa Clarita Valley during the quarter. -Retail complex Sutter Point Plaza sold for $7.11 million, or $175 a square foot, to Frank & Sharon Arthofer in San Marino. Safco Capital Corp. in Los Angeles was the seller of the 40,761-square-foot strip mall. -DR Property Group in Beverly Hills bought a retail center at 23360-23380 Valencia Blvd. in Valencia for $6.3 million, or $268 a square foot, from Prot Inc. The 23,494-square-foot property, known as Cinema Center, was built in 1987. The glass was half-full for Santa Clarita Valley’s office market in the third quarter. The submarket’s vacancy rate fell a half-point to 15.2 percent in the third quarter compared with the previous one, according to data from Colliers International. Tenants absorbed 10,600 square feet of office space in the more than 2 million-square-foot submarket. Christopher Beck, managing director at Newmark Grubb Knight Frank in downtown Los Angeles, said the reasons for the improvement are clear. “Markets like Santa Clarita Valley are wholeheartedly reaping the benefits of the low vacancy rates of surrounding areas,” he said. “In the larger picture, there’s a lot of labor and skilled workers who come from that area and it’s an attractive marketplace.” Indeed, the valley has lured companies that might have a hard time finding the amount of space they need elsewhere. Last quarter, Logix Federal Credit Union announced it would leave its Burbank home of 30 years after it bought a 12-acre parcel at the Valencia Commerce Center, where it plans to build a 170,000-square-foot headquarters. The credit union purchased the property from partnership LNR Gateway V for an undisclosed price. That much space is simply not available in Burbank, Beck said. With the absorption small compared with the size of the market, Santa Clarita Valley landlords kept asking rates flat at $2.30 a square foot – a 52 cent discount to the larger San Fernando Valley and a 74-penny discount to Burbank. “We are the economical market in the L.A. north region,” said Ryan House, a vice president for Jones Lang LaSalle Inc. in Valencia, who added leasing wasn’t the only positive aspect of the market last quarter. “The more important storyline for Santa Clarita is the significant amount of capital markets activity.” Among notable deals, True North Management Group, a New York investor, bought the Valencia Corporate Plaza on the 28400 block of Avenue Stanford for $41.3 million, or about $212 a square foot. That’s a substantial premium to the $31 million sellers Angelo Gordon & Co. and Pacific Office Properties Trust Inc. paid for the 194,400-square-foot, three-building office complex in 2011. Sales weren’t limited to office properties, either. In the submarket’s top industrial sale last quarter, One Properties of Los Angeles bought a 51,385-square-foot industrial property from Sierra Square in Cupertino for $14 million, or about $272 a square foot. Brokers expect the market activity to continue as long as the economy continues on the same path, and supply and demand remains tight. “What really is drawing all the flurry is interest rates haven’t been raised and you’ve got a phenomenal amount of foreign capital coming into the marketplace,” said Beck. “There’s no new construction and most buildings that have been on the market have sold.” However, for those who view the glass half-empty, there are still properties for sale. Invesco Real Estate put the Valencia Town Center, a 400,000-square-foot office-retail complex where Princess Cruises is headquartered, on the market for an undisclosed sum. The firm bought it in 2006 for $166 million. House believes these are all good signs for future growth, even if the vacancy rate doesn’t move too much more. “Headed into 2016, I think all things are pointing toward the market continuing to stabilize,” he said “We’re probably not going to see it in the absorption because there are not a lot of large blocks of available space.” – Jacquelyn Ryan

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