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Suburban Market Grows as Area Attracts Outside Companies

California Resources Corp., a spinoff of Houston’s Occidental Petroleum Corp., leased 21,304 square feet at 27200 Tourney Road in Valencia from landlord Arden Realty Inc. Terms of the deal were not disclosed. The 213,000-square-foot office building has monthly asking rates between $2 and $2.50 a square foot. Medical equipment and technology company ASC Process Systems expanded its headquarters, leasing 23,831 square feet at 28516 Livingston Ave. from landlords 24-25 Partners LLC and Industrial Associates LLC. The firm now occupies at least 125,000 square feet of manufacturing space in two Valencia facilities. Full terms were not disclosed but the average rent is $7.44 a square foot annually. Senior Housing Properties Trust bought an office building at 28515 Westinghouse Place as part of a larger 23-property $3 billion investment portfolio from Select Income REIT in February. The 146,000-square-foot office building in Valencia sold for $71.9 million, or about $492 a square foot. The building, which is headquarters for cochlear implant maker Advanced Bionics LLC, was one of the county’s biggest sales transactions during the quarter. Allee Investments LLC bought a 44,311-square-foot office building at 23838 Valencia Blvd. in Valencia in February for $16.3 million. VPIP LLC and Two Way Option LLC sold the 20-year-old property, which was renovated in 2005. The price, at $368 a square foot, was among the highest prices on a square foot basis in the submarket. Vallarta Supermarkets leased 40,751 square feet at 18571-18595 Soledad Canyon Road, Canyon Country from landlord Kimco Realty Corp. in January. The grocer, which opened in February, replaced an Albertsons and now anchors the 54,000-square-foot Canyon Square Plaza strip mall. Terms were not disclosed but monthly asking rates are about $2 a square foot. With several of the Santa Clarita Valley’s leading industries recovering, the office market made incremental progress last quarter that appears to be setting the stage for future gains. The vacancy rate sank two tenths of a point to 14.6 percent in the first quarter as tenants took just 3,600 square feet off the market, according to data from the L.A. office of Colliers International. It represented almost a lull after large gains last year, but brokers said the figure is deceptive. “The market has rebounded unbelievably well. You’re going to see that overall vacancy rate continues to drop. It will get down to 10 percent vacancy by the end of the year and you will see some new construction for office space,” said Craig Peters, executive vice president at CBRE Group Inc.’s Universal City office who focuses on the Santa Clarita Valley. He added that primary industry clusters are “firing on all cylinders,” including biomedical firms, medical-device manufacturers, aerospace and entertainment. Consider medical equipment and technology company ASC Process Systems, which expanded its Valencia headquarters by 23,831 square feet last quarter. It signed a deal at 28516 Livingston Ave. with landlords 24-25 Partners LLC and Industrial Associates LLC in February. The firm now occupies at least 125,000 square feet of manufacturing space. Ryan House, a vice president at Jones Lang LaSalle Inc., said Santa Clarita is also attracting out-of-market firms. “What we are seeing is that the larger tenants that have leased office space are really for the most part net new absorption and new tenancy,” he said. The largest lease deal in the quarter was signed by California Resources Corp., a subsidiary that was spun off of Houston’s Occidental Petroleum Corp. late last year. The oil-and-natural gas company leased 21,304 square feet on 27200 Tourney Road in Valencia from landlord Arden Realty Inc. The 213,000-square-foot office building, with asking rates between $2 and $2.50 a square foot monthly, is now more than 80 percent occupied. However, the company did not move in so the sale did not yet move the needle in the market. Still, landlords are remaining cautious as asking rates remained virtually flat, dropping only a penny to $2.32 a square foot. However, House notes that he saw fewer concessions and free rent as part of deals in the quarter. Investors see potential in the market too. Select Income REIT, in Newton, Mass., sold a 146,000-square-foot office building at 28515 Westinghouse Place for $71.9 million in February. It was part of a larger 23-property $3 billion portfolio sale to Senior Housing Properties Trust. The building, which headquarters cochlear implant maker Advanced Bionics LLC, was one of the county’s top 10 sales last quarter. “The fact that it was one of the county’s top sales illustrates Santa Clarita Valley is doing well right now,” said Arty Maharajh, vice president of research at Cassidy Turley’s downtown office. The Santa Clarita industrial market also saw improvement, as its vacancy rate dropped two-tenths of a point to 4.3 percent. – Jacquelyn Ryan

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