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Saturday, May 28, 2022

Lack of New Product Tempers Optimism Despite Improvement

Even the good news in the Santa Clarita Valley commercial real estate market was tempered in the third quarter. The office segment made progress, absorbing 27,700 square feet and lowering the vacancy rate by nearly a point and a half to 14.9 percent, according to data from the L.A. office of Colliers International. But Santa Clarita has only a little over 2 million square feet of office space and there is nothing under construction or coming on line. So there just isn’t much room for growth. “The market is going to stay this way in the foreseeable future,” said Ryan House, vice president at the Valencia office of Jones Lang LaSalle Inc. “We’re not at a point where spec development is justified.” Even so, there are signs of improvement. Landlords weren’t confident enough to raise Class A asking rents beyond the $2.33 per square average of the second quarter, but House said fewer concessions were being offered. The industrial market was stagnant in the third quarter as the market awaits new development. There are about 6 million square feet of industrial development fully entitled and set to break ground among three separate projects, two of which were expected to start this year. Gateway V, which will be part of the existing 8.5-million-square-foot Valencia Commerce Center, will deliver four industrial buildings and is being developed by Starwood CPG Operations LLC of Newport Beach. And Sterling Gateway, a 70-acre project from Catellus Development of Oakland – tucked into some rolling hills in the northwest area of the valley, not far from Val Verde – was originally supposed to break ground this summer. But it appears there will be delays in the groundbreaking. While 220,000 square feet of space in the market was sold or leased in the third quarter – and landlords raised asking rates 6 cents to 59 cents a square foot – it wasn’t enough to move the needle on vacancies, which remained at 5.2 percent. One of the larger industrial deals was a lease in August, when World Trading 23 moved into 45,000 square feet at 28904 Avenue Paine in Valencia. The company, which sells wholesale radio-controlled helicopters, cars, trucks and other toys, leased the space from landlord Clarion Partners of New York. Financial terms were unavailable but it was marketed for 49 cents a square foot. “There just isn’t a lot of activity in the market right now,” said Chris Jackson, executive vice president at the Encino office of NAI Capital Inc. “It’s stable, but not a lot of deals are getting done.” Then there’s the future of the 120-acre Mann Biomedical Park in Valencia, owned by billionaire medical device entrepreneur Alfred Mann. The park, home to several Mann-affiliated companies, is in negotiations to be bought for about $100 million by Intertex Cos. in Valencia with financial backing from L.A. investment firm Oaktree Capital Management LP. But the deal has yet to close. Still, there was activity as institutional money continues to flow. In July, Rexford Industrial Realty Inc. purchased a 139,000-square-foot industrial property at 24935 Avenue Kearny in Valencia for $11.5 million. The property comprises two 1980s-era buildings of similar size fully leased to PDA Group, a packaging distributor for clients in the auto, chemical, cosmetic, food and personal-care industries. And there were sales in the retail and specialty markets. In August, the Village at Seco Canyon, a 42,000-square-foot shopping center in Valencia, was sold by Arnel Commercial Properties in Costa Mesa to SOC-Seco LLC of Beverly Hills for $13.8 million. – Elliot Golan Main Events A 45-unit apartment building in Canyon Country sold in July for $7.2 million. Villa Gardens was purchased by Richard Kaufman of Woodland Hills from Sudhir Banker of Northridge. The 35,000-square-foot building at 27301 Whites Canyon Road was constructed in 1978 and was 97 percent leased at the time of sale. The Village at Seco Canyon, a 42,000-square-foot shopping center in Valencia, was sold by Arnel Commercial Properties in Costa Mesa for $13.8 million. The neighborhood center has a mix of retail tenants, including a CVS Pharmacy and several restaurants. Rexford Industrial Realty Inc. purchased a 139,000-square-foot Valencia industrial property for $11.5 million in July. The 24935 Avenue Kearny property consists of two 1980s-era industrial buildings of similar size picked up from the Joan Kelso Family Limited Partnership of Calabasas and the Arnold & Caylene Gustin Living Trust of La Crescenta. Both are leased to PDA Group, a distribution company. Two hotels in Valencia were purchased out of receivership for $21 million in August. A 118-room Holiday Inn Express, at 27513 Championship Way, and the 120-room Best Western at 27413 Wayne Mills Place, were purchased by Excel Hotel Group of San Diego. They were formerly owned by Ocean Park Hotels Inc. of San Louis Obispo. World Trading 23 moved into 45,000 square feet at 28904 Avenue Paine in Valencia in August. The company, which sells wholesale toy helicopters, cars and trucks leased the space from landlord Clarion Partners of New York. Santa Clarita Valley Office Market At a Glance Inventory 2.07 million square feet Under Construction 0 Class A Asking Rents $2.33

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