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Friday, Jan 27, 2023
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Commercial Real Estate Vacancies Continue Climb in Q3

The office market in San Fernando Valley and Ventura County saw total vacancy rates increase 40 basis points to 18.3 percent with net absorption of -123,600 square feet in Q3, according to Colliers International. The rate of space givebacks continued to slow for the second consecutive quarter, but vacancy levels are already at the highest level since the dot-com bust earlier this decade. The direct weighted average asking rent decreased for the sixth consecutive quarter to $2.37 per square foot, per month Full Service Gross, the lowest average asking rental rate seen market-wide in almost three years. The small decrease in rents relative to what has been seen over the past 18 months may, however, be a sign that the decline in rents is moderating. Leasing activity decreased 31 percent over last quarter to 439,100 square feet. The amount of space givebacks and increase in office vacancy were lower than expected, considering the sharp rise in vacancy levels at the beginning of the year, said the report. Industrial Sales/Leasing The area’s industrial market saw the total vacancy rate increase 20 basis points over last quarter to 3.9 percent. While the total vacancy rate increased only slightly market-wide, the availability rate continued to increase to a decade-wide high of 9.2 percent. As available occupied space rolls vacant, it’s expected that vacancy rates will continue to climb to heights not seen in over a decade. Despite the uncertainty facing most owner/users and investors, the market saw a 32 percent increase in the amount of sales and leasing activity from the previous quarter to 1.07 million square feet. This is down 26 percent from the 1.5 million square feet of activity seen a year ago. But increased activity for the second consecutive quarter may be a sign that industrial users are finally making real estate decisions. The vacancy rate in the area’s R & D; market increased to 12.2 percent in Q3. Sales and leasing activity was also up from 176,000 square feet in Q2 to 217,500 square feet in Q3. Retail Vacancy on the Rise Marcus & Millichap Real Estate Investment Services said reduced consumer spending due to job losses has contributed to five consecutive quarters of negative net absorption of retail space in L.A. County. In 2009, employers are expected to cut 162,000 workers from payrolls. Last year, employers slashed 138,700 jobs. Developers have projects totaling 3.1 million square feet slated to come online this year, which will expand the retail stock by 1.5 percent. In 2008, approximately three million square feet was completed. Vacancy is forecast to increase 210 basis points to 6.6 percent in 2009, 350 basis points above the metro area’s five-year annual average. Vacancy increased 170 basis points last year. Asking rents are set to fall three percent this year to $28.94 per square foot while effective rents retreat 4.5 percent to $25.84. Realtors Love Technology The California Association of Realtors released its annual “Use of Technology Survey,” which noted 46 percent of realtors in the state use some sort of social networking Web site for business purposes. The most popular social networking sites are LinkedIn (34 percent), YouTube (13 percent), and MySpace (12 percent). Thirty-nine percent of realtors own a handheld wireless Internet device for their real estate business, up from 22 percent a year ago. When asked how they use the device for business, 90 percent said they use it for e-mail and 76 percent said they use it to respond quickly to clients. The most popular Web sites for marketing properties are Yahoo Real Estate, newspaper Web sites, Zillow and Craigslist. Colony Financial Closes IPO A few months ago I wrote about a trend of companies in the Los Angeles area registering with the U.S. Securities Exchange Commission to do an initial public offering. They were all newly formed entities in the business of investing in and/or originating commercial or residential real estate debt. On September 23, one of those companies, Colony Financial, closed its IPO of 12,500,000 shares of common stock, priced at $20 per share. Total gross proceeds from the public offering and the concurrent private placement were $255 million. Colony intends to use the proceeds to acquire and originate commercial mortgage loans that may be performing, sub-performing or non-performing (including loan-to-own strategies). It also plans to focus on commercial real estate related debt investments, commercial mortgage backed securities, real estate owned properties, and other real estate related assets. Staff Reporter Eric Billingsley can be reached at (818) 316-3124 or at ebillingsley@sfvbj.com.

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