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Tuesday, Mar 5, 2024

Landlords Working Harder To Keep Tenants Happy

Landlords Working Harder To Keep Tenants Happy Real Estate by Shelly Garcia SunAmerica Cos. just re-upped its lease at Warner Center’s Plaza III, adding another 60,000 square feet to the 96,000 feet it already occupies. In another kind of market, such a move might escape my attention altogether. But this isn’t another market. It is the current one, where leasing activity is at a near-standstill and brokers have to turn over an awful lot of rocks. In this market, a deal, even a renewal, catches my attention, and once it did, I realized something else about this market: It’s good to be the tenant. SunAmerica’s 10-year lease is valued at $50 million. That comes out to about $2.67 per square foot. As CB Richard Ellis’ Bill Inglis, who represents Warner Center Properties, put it, “That’s a pretty good deal for 10 years. Two years ago, it would have been three bucks or more.” Warner Center Properties also has some pretty good reasons to give a little and then some. It’s got a 21-percent vacancy rate. One of its towers is empty with the departure of HealthNet. There are no big tenants out trolling for space. And the owners of the complex are deep into negotiations with potential buyers. But it isn’t just Warner Center offering big tenants good deals on renewals these days. With vacancies continuing to climb in the San Fernando Valley’s office sector, nearly all tenants are finding themselves in the catbird seat and they’re working it. Tenants renewing leases usually get a paint job, maybe new carpeting. Now they’re comparing the cost of these minimal improvements with the tenant improvement budget a new occupant might get in the current market and asking landlords for that expenditure in kind. They may not need new cabinets, or extra doorways, so instead they’re asking landlords to pay for such things as phone systems, or they’re asking for free rent or rent reductions. Sure, landlords can puff out their chests and remind tenants about the cost of a move, in productivity as well as dollars and cents. Some are even spending a little time with their tenants, developing the kind of relationship that they hope will help compensate for an extra 10 cents a foot in rent. But within reason, I’m told, they’re conceding to tenants’ demands. Those with the highest vacancy rates are offering the cheapest deals, but all landlords are feeling the pinch. “I don’t think there’s been a really good deal for the landlord here in the last 12 months,” said Brian Forster, co-owner at TOLD Partners, of the West Valley market. Depending on whose numbers you use, office vacancies in the greater San Fernando Valley area are up anywhere from 16 percent to 18 percent. That’s got landlords working very hard to keep their current tenants. And while rental rates are still averaging about $2.20 a square foot, not too far below where they were six months ago when vacancies were much lower, those numbers don’t tell the whole story. Which brings me back to SunAmerica. Chances are that $2.67 rate is going to look pretty good five years from now with another five years left on its lease. TV Land Principals of Pie Town Productions, a television production company specializing in reality and documentary programming, have acquired an 18,200-square-foot building at 5433 Laurel Canyon Blvd. in North Hollywood. The purchase price was more than $2 million Pie Town’s offices and studios will occupy the facility. Stacy Vierheilig at Charles Dunn Co. Inc. represented the buyers, Tara Sandler and Jennifer Davidson, and the seller, Marv Atkins. Warehouse Sale Marfred Industries has acquired a 98,000-square-foot warehouse in Sylmar. The company already occupies an adjacent building for its manufacturing. The purchase price was in excess of $62 per square foot, according to Ross Thomas, principal of Delphi Business Properties, who represented Marfred and the seller, Industrial Holdings. Camarillo Purchase Advanced Imaging Inc. acquired a 25,821-square-foot industrial facility in Camarillo for $1.95 million. The building, located at 829 Via Alondra, sits on 1.3 acres in the Industrial Complex of Camarillo. Stuart Scott, a broker with Daum Commercial Real Estate Services, represented the buyer. The seller was TOLD Corp. Short Flight CBOL Inc., a maker of aerospace products, subleased 12,376 square feet from McDonald’s Corp. at 21300 Victory Blvd. McDonald’s consolidated its training facilities at one location and leased the remaining space at the office building. CBOL is relocating from 6200 Canoga Ave. Tom Festa, broker with Grubb & Ellis, represented CBOL. McDonald’s was represented by Jeff Ingham and Dan Baumeister at Jones Lang LaSalle. Senior reporter Shelly Garcia can be reached at (818) 676-1750, ext. 14 or by e-mail at sgarcia@sfvbj.com.

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