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Friday, Jan 27, 2023
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Rising Vacancy Rate Belies Busy Start to Year Across Valley

The Olive Encino, a 120-unit, 205,000-square-foot apartment building at 5501 Newcastle Ave., Encino, sold for $44 million to Venture Capital West LP of Los Angeles. The seller was IMT Capital of Sherman Oaks. Cory Stehr, Jim Fisher and Mike Smith of Lee & Associates brokered the deal. As part of its Woodland Hills expansion, Westfield Group purchased the AMC Theatres at Westfield Promenade and the Sears at Westfield Topanga. The 130,000-square-foot theater complex, at 21801 Oxnard St., was purchased for $42.7 million (about $330 a square foot) from real estate investment trust EPR Properties of Kansas City. Sears Holding Corp. of Hoffman Estates, Ill. sold its property at 21851 Victory Blvd. for $42.5 million, or around $425 a square foot. Accounting firm David Weise & Associates renewed its lease at 16000 Ventura Blvd., Encino and added extra space for a total of 21,500 square feet. The company has been on site since 2003 and took a 91-month renewal to lock in rates. A 168,000-square-foot industrial building at 9545 San Fernando Road in Sun Valley sold for $22.8 million to Prologis, a San Francisco real estate investment trust. The property, sold by a private investor, is leased to Sugar Foods Corp., a multinational food manufacturer. Rexford Industrial Realty Inc. acquired a 154,000-square-foot industrial building in Chatsworth for $14.1 million. The L.A. real estate investment trust bought the 6.7-acre property at 9401 De Soto Ave. from Topco Sales, an adult sex-toy manufacturer and distributor that had occupied the building since 2003. Several large deals got the year off to a bright start in the San Fernando Valley, despite a surprising jump in the vacancy rate. Much of the region saw a high level of activity but the lagging Central Valley pulled down the market, which returned 24,000 square feet overall in first quarter. As a result, the submarket’s vacancy rate increased to 15.2 percent, up seven-tenths of a point from the prior quarter, according to data from the L.A. office of Colliers International. The quarter’s biggest office deal took place in Encino when First Financial Plaza, a six-story, 222,000-square-foot building at 16830 Ventura Blvd., changed hands for $89 million. Real estate investment trust Douglas Emmett Inc., of Santa Monica, acquired the building, which was 95 percent leased to professional services firms including brokerage Marcus & Millichap Inc. The seller was L.A. real estate investment firm Hudson Pacific Properties Inc. The biggest retail deal of the quarter lured sports mogul Stan Kroenke from over the hill in Inglewood, where he wants to move his St. Louis Rams NFL team. Kroenke Group of Columbia, Mo. paid $115 million for Nordhoff Plaza, a 257,000-square-foot shopping center at Tampa Avenue and Nordhoff Street in Northridge. The sellers were two investment groups, Angelo, Gordon & Co. of New York and CorAmerica Mortgage Advisors LLC of El Segundo, that cashed out after picking up the retail center for $90 million in 2012. The biggest surprise of first quarter was the Central Valley submarket, which has enjoyed single-digit vacancy for more than a year, giving back 88,500 square feet and seeing its vacancy rate pushed up nearly two percentage points to 11.2 percent as a result. The increased vacancy was even more surprising given that average asking rents dropped 2 cents to $2.11. That price is down from $2.26 a year ago. Ryan House, vice president at Jones Lang LaSalle, speculated that the jump in vacancy may be attributable to two new projects and a downsized lease renewal. The Ranch and The Press, both former industrial properties in the 14000 block of Califa Street in Van Nuys, have been revamped as creative office space and currently sit mostly empty as they seek new tenants. And Prospect Mortgage, a long-time tenant at the Courtyard Office Building, in the Sherman Oaks Galleria at 15301 Ventura Blvd., renewed for 30,000 square feet less space than it had been leasing. But House said he isn’t worried about empty space piling up – or rents heading down. “In fact, we’re starting to see rents increase on a broader scale than we’ve seen in previous quarters,” he said. Both the West and East Valley submarkets had healthy first quarters, with 40,500 square feet coming off the market in the West Valley and vacancy dropping three-tenths of a point to 16.5 percent. At $2.16, asking rents are identical to the fourth quarter and down just 2 cents from a year earlier. The East Valley absorbed 23,600 square feet as vacancy dropped nearly a full percentage point to 14.3 percent. That rate also is down dramatically from 20.2 percent a year ago, pushing up average asking rents 4 cents to $2.31 over the period. Industrial vacancies throughout the region continue to be tight at 1.3 percent, with the Central Valley rate dipping down to half a percent in first quarter. – Karen E. Klein

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