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Tuesday, May 24, 2022

East Valley Shines as Traditionally Strong Central Returns Space

The San Fernando Valley office market was a hard place to figure out in the second quarter, but could early summer vacations offer some understanding? Vacancy rates in the market slid three tenths of a point to 14.9 percent since the first quarter, according to the L.A. office of Colliers International. But that figure masked a see-saw period in which the East Valley submarket was the bright spot, where 56,000 square feet was taken off the market, while the region’s traditionally strongest submarket, the Central Valley, gave back 38,300. Stacy Vierheilig-Fraser, senior managing director at Charles Dunn Co. Inc., theorized that changes in the school calendar could have impacted movement in the office market. “People’s kids go back to school earlier so they can’t vacation in August. They travel in June now,” she said. Regardless of the reason, 39,400 square feet were taken off the market valleywide and asking rents flattened at $2.21 per square foot. In the Central Valley, with the vacancy rate at 9.9 percent, the lowest of all submarkets in the greater Valley region, landlords pushed up asking rents up 7 cents to $2.33 a square foot. The Central Valley is still considered a bargain though, especially compared to costly submarkets farther south like Santa Monica and Beverly Hills. That price disparity is driving demand over the hill, said Kevin Fenenbock, senior vice president at Colliers. He is leasing agent at The Ranch, an 11.5-acre creative office revamp at 14801-14823 Califa St. in Van Nuys. The property, which once housed shampoo-maker Redken, has become a test case since its third-generation owners decided to upgrade two 18,500-square-foot buildings a year ago. So far, demand looks favorable. Fenenbock said negotiations are underway for a 13,000-square-foot lease on one building and multiple tenants are vying to lease the entire second building. “We’re seeing an incredible amount of activity, mainly from companies getting priced out of the Westside,” he said. The West Valley, traditionally the weakest submarket in the region, saw the largest relocation when Universal Music Group took 146,636 square feet at 21301 Burbank Blvd., at the LNR Warner Center in Woodland Hills. The deal did not move the needle much on vacancy, which dropped just two-tenths of a point during the quarter to 15.9 percent. That’s because Universal’s June lease represented a local reshuffling: The company had been subleasing space from Farmers Insurance Group, which is consolidating operations at its new headquarters complex on Owensmouth Avenue. Industrial space is becoming tighter in the Valley, despite 67,000 square feet being put back on the market in the quarter. Overall vacancy stayed flat at 2.4 percent. “The demand is great but there is not much product,” said Nigel Stout, vice president at Jones Lang LaSalle Inc. “In the past few years, former aerospace and manufacturing facilities have been converted into residential or mixed uses and industrial has fallen by the wayside.” – Karen E. Klein Main Events – Two shopping centers changed hands in off-market transactions. The 30,467-square-foot Sherman Oaks Shopping Center, at 4550-4578 Van Nuys Blvd., was purchased for $16.8 million by Festival Cos., which plans to rehab the 1960 property. The center was 77 percent leased when it sold in May; tenants include Solley’s Restaurant & Deli. The Fallbrook Center, at 6633 Fallbrook Avenue in West Hills, was purchased by Retail Opportunity Investments Corp. of New York for $210 million in June. The property houses multiple anchor tenants including Trader Joe’s, Sprouts, Old Navy and Home Depot. The seller was Chicago-based real estate investment trust General Growth Properties Inc. – The Mercedes-Benz of Encino traded hands in April for $47.2 million. TADG Real Estate Group LLC of Encino bought the property from David Peterson Holdings Inc. of Louisville, Ky. The 221,000-square-foot dealership was built on 2.3-acres in 1991. – Vista Investment Group LLC of Santa Monica paid $18.7 million for the NoHo Lofts in May. The upscale live/work complex is at 5355 Cartwright Ave., in the Arts District of North Hollywood. The purchase of the 68 lofts, converted from a 1950s warehouse in 2006, included 15,195 square feet of land directly across the street. That parcel, at 5357-5361 Denny Ave., is fully entitled for up to 20 units and 80 parking spaces. – In May, United Online Inc., a publicly traded Internet company, signed a six-year lease for 29,576 square feet at the LNR Warner Center, 21255 Burbank Blvd. in Woodland Hills. The company expects to relocate its headquarters there in October. – A two-building portfolio of industrial properties in Sylmar sold last month for $9.1 million. The buildings at 12460 Gladstone Ave. and 12458 Gladstone Ave. add up to about 67,000 square feet and were purchased by Selective Real Estate Investments of Encino from EACO Corp. of Neptune Beach, Fla. The buildings were constructed on 5.2 acres about 30 years ago and are fully leased. San Fernando Valley Office Market At a Glance Inventory: 21.9 million square feet Under Construction: 0 Class A Asking Rents: $2.21

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