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Monday, May 16, 2022

Lagging Santa Clarita Pins Hope On Growth of Owner-Users

Vacancy stayed almost flat in the Santa Clarita Valley office market in the first quarter as the region continued to struggle in the post-recession era. While there was some increased activity in 2013 and a couple of promising deals closed late in the year, the region now has the dubious honor of holding the highest office vacancy rate in the greater Valley area outside of Burbank and Glendale, according to the L.A. office of Colliers International. Santa Clarita has even lagged as other areas hardest hit by recession, such as western Ventura County, have begun putting the pedal down on recovery. First quarter vacancy in Santa Clarita barely budged, edging down one tenth of a point to 20.9 percent. A little more than 3,000 square feet came off the market, and average asking rents decreased 3 cents to $2.33. Landlords are responding to the stagnancy in the market, as rents were up around $2.39 in mid-2013. Despite the blasé start to the year, Ryan House, vice president of the Valencia office of Jones Lang LaSalle, remains optimistic. A number of owner-user office purchases in the past 12 months have tightened the market significantly, starting with the purchase of a new headquarters last summer by Sunkist Growers Inc. In the same vein, credit-card processing company NETbilling purchased a 20,730-square-foot building at 27451 Tourney Road in Valencia. The company had been a tenant at the space, which is 100 percent leased. The $5.9 million sale from JSB Development in Valencia allows a mid-sized business a real estate investment and a home, House said. Similar factors were at work in the sale of the Bank America Tower in Santa Clarita to tenant Peterson International Underwriters in fourth quarter 2013. Those sorts of sales, often fueled by SBA loans, represent tenants recognizing investment opportunities and seizing them, House said. “Lots of buildings were vacant and had been sitting awhile because leasing activity in Santa Clarita has not been strong for the past few years. But now that’s changing,” he said. Still, with the vacancy rate stubbornly above 20 percent there is no construction underway and that means lack of larger space for potential tenants. “There are a couple of projects either planned or proposed, but those developers have gone back to the drawing board and are revising construction costs so they are adequately prepared for when a tenant comes in and needs 40,000 to 50,000 feet or more,” House said. “It’s likely that the new large user will be a build-to-suit opportunity.” The largest transaction of the quarter was not in the office sector but in multi-family residential. In late January, MBK Senior Living of Irvine sold Summerhill Villa, a luxury senior living community, and a second property in northern California, to American Realty Capital Healthcare Trust I of New York for $104.5 million, or about $357,000 per unit. Summerhill Villa on Lyons Avenue in Newhall consists of 134 units and was 98.4 percent occupied at the time of the sale. MBK Senior Living will continue to manage the communities. Santa Clarita’s industrial market did not fare much better than its office market, giving back nearly 121,000 square feet in the quarter. The vacancy rate for industrial properties rose to 5.6 percent from 5 percent, making it one of the highest in the larger region, behind only the west Ventura and Simi Valley markets. There was some activity in the sector, however, most notably with HVAC contractor Sheldon Mechanical Corp. of Valencia Clarita selling two industrial warehouses in Valencia to private investors. – Karen E. Klein Main Events The Summit Oaks office building in Valencia was purchased by Cole Real Estate Investments of Phoenix in January for $44 million. The five-story, 146,000-square-foot building at 28515 Westinghouse Place was sold by Heitman Inc. of Chicago. It is fully leased to medical device manufacturer Advanced Bionics LLC, which extended its lease another decade before the sale. Last month, a 24,000-square-foot industrial warehouse with 4,300-square-feet of office space in Valencia sold for nearly $3.1 million. The 21130 Centre Pointe Parkway building was purchased by a private trust from Sheldon Mechanical Corp. of Santa Clarita. The Old Road Harley Davidson motorcycle dealership is a tenant in the Class B space. A 7,300-square-foot retail building in Valencia was purchased by its tenant, Kisho Japanese Restaurant, for $2.5 million. The building at 23430 Valencia Blvd. was bought from Degidio Trust of Ventura. The building on 1 acre was constructed in 1981. Sheldon Mechanical sold another of its industrial properties in March, a building in the Summit Oaks corporate center at 26475 Summit Circle. A private family trust purchased the 14,000-square-foot building for $1.9 million last month. Constructed in 2006, the building is leased to Leatt Protectives, a company making protective braces for motorcycle and bicycle enthusiasts. Heartland Precision Fasteners Inc., a Chatsworth manufacturer of fasteners for the aerospace industry, purchased a flex building in January for $2.1 million from an undisclosed seller. The building consists of 70 percent office and 30 percent warehouse space. Santa Clarita Valley Office Market At a Glance Inventory 2.19 million square feet Under Construction 0 Class A Asking Rents $2.33

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