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Wednesday, Dec 6, 2023

Mass Space Relocation Not Foreseen

By THOM SENZEE Contributing Reporter Commercial real estate brokers are joining the leagues of other business owners from the San Fernando Valley to Ventura County who are closely watching for an indication of what impact the pending acquisition of Countrywide Financial by Bank of America will have on their industries. The difference between this group and other local businesses is the fact that many brokers believe there could be some positive outcomes even if the mortgage giant decides to eliminate some of its sprawling presence in office buildings throughout the region. “This is a healthy market,” said Bruce Frasco, executive vice president at NAI Capital in Westlake Village. “It’s a very desirable location, and space is in high demand.” Frasco says there is little chance there will be any mass migration of operations or outright closures of any of the company’s 1.5 million square feet of office space for at least 10 to 12 months. Indeed, Countrywide says no major changes will come before the end of 2009. “The market demand just in Westlake and the Conejo Valley is about five million square feet,” Frasco said. “And that grows by 300,000 every year.” He believes the office-space market in the region is somewhat insulated because of that demand. That’s not to say there is no danger of a glut of office space hitting the region if there were a sudden exodus by Countrywide. “No one knows if Bank of America and Countrywide will combine facilities or how much overlap they have,” Frasco said. “Remember, they still need employees to service all their loans,” The company has announced publicly that it plans to beef up its loan-servicing operations. That’s good news for Frasco and other brokers who are involved with properties in the San Fernando Valley where Countrywide has thousands of loan-servicing specialists and support staff. “We handle a couple of (Countrywide) buildings in Van Nuys that do just that kind of business, and they have been adding employees,” he said. There is also the possibility that Bank of America’s purchase of Countrywide will not include all of its real estate holdings. That would change the equation to a large degree if it does not, Frasco said. But given the fact that Countrywide owns approximately 75 percent of its office space in northern Los Angeles County and southern Ventura County, Frasco says Bank of America would probably want those assets as part of the deal. Countrywide officials could not be reached for comment. According to NAI’s Frasco, Countrywide’s newest digs, (a 180,000 square-foot facility on Russell Ranch Road in Westlake Village) would be easy to convert into smaller offices for multi-tenant use should the company decide to vacate that space. “The demand would easily fill even a property the size of the Russell Ranch location the way the market is today,” he said. “There could be a single tenant waiting in the wings somewhere, but that wouldn’t be necessary to lease it.” Simi Valley is also home to a substantial amount of Countrywide-occupied office space, as well as a 135,000 square-foot warehouse (owned by the company, but as yet never occupied). “Currently Countrywide occupies about 850,000 square feet in Simi Valley,” said Brian P. Gabler, director of economic development at the City of Simi Valley. “Seven-hundred fifty-thousand square feet of the space is owned by Countrywide in four buildings and 100,000 square feet is leased in another building.” However, that square-footage generates only $45,000 in property taxes for the city. Its real value to Simi Valley is in the jobs it creates and the money Countrywide spends locally. City officials say they doubt their community’s largest employer is likely to leave even after Bank of America takes over. “Since (they) relocated to Simi Valley, the city has had an excellent relationship and open dialogue with Countrywide, with regular updates (given to the community),” Gabler said. The city has not taken any steps to prepare for a mass relocation of Countrywide, said Gabler who added that the city is quite confident the financial-services behemoth, for the most part, is staying put. And if it doesn’t, Gabler believes another company would eagerly move in and take advantage of his city’s skilled workforce and “business-friendly” government. That, he says, means vacant office space would not remain that way for long. “We believe it is realistic that a majority of Countrywide’s loan-servicing operations, which constitute 85 percent of the Countrywide employment in Simi Valley, will remain in the community,” Gabler said. He expects his boss, City Manager Mike Sedell, and other city officials will sit down with representatives of Bank of America soon to discuss Countrywide’s operations in Simi Valley. “We can work cooperatively with them as we have with Countrywide,” he said. Jack Kyser, chief economist for the Los Angeles County Economic Development Corporation, says even if the office market in Simi Valley and the San Fernando and Conejo Valleys were to take a hit as a result of Countrywide vacating large amounts of the space it currently occupies in those regions, the damage would be short-lived and minimal. “This is a unique market because it is so desirable and vacancy rates are so low,” Kyser said. “Currently it’s running around seven percent.” Kyser says the local commercial real estate market would not be completely spared. “It wouldn’t be completely painless but almost.”

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