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Monday, Oct 3, 2022
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Numbers Paint Distorted Picture of Santa Clarita Valley Market

Sometimes the numbers just don’t paint the whole picture. Take, for example, the Santa Clarita Valley office market. While data from Colliers International shows a higher vacancy rate for the second quarter – up more than three points since the first quarter to 20.4 percent – brokers in the area said the numbers are masking an uptick in activity. “There are a number of deals that were just signed or are in talks,” said Ryan House, vice president at Jones Lang LaSalle Inc.’s Valencia office. “So we’re going to see at least 30,000 to 40,000 square feet come off the market in the next few quarters. In a small market, that’s quite a bit.” And looking at the average rents – up 4 cents from the previous quarter to $2.39 a square foot – landlords are feeling confident they’ll find tenants. Skewing the numbers was the delivery of the Santa Clarita Professional Center, a 106,000-square-foot office building constructed on spec. Brokers just began marketing the 17901 Soledad Canyon Road building, which is being readied for tenants. “(The center) is unusual because it’s not along the 5 (freeway) in Valencia, which is traditionally the office market area. It’s 10 miles or so east,” said House, who does not represent the property. “Do I think it will eventually lease up? Yes. But I think it will take some time.” Like much of the northern Los Angeles submarkets, the movement was slow but steady. A collection of smaller leases accounted for the 10,200 square feet of net absorption. “There were no major leases, but we’re seeing big improvement over a year ago,” House said. “There are people moving around and there are people expanding a little.” Office sales were virtually non-existent in the market during the quarter, with just two transactions totaling 17,918 square feet. Meanwhile, the industrial market also showed growth, and area brokers say that it’s likely to stay tight for quite some time. Asking rents edged higher one cent to 41 cents a square foot and the vacancy rate fell four-fifths of a percentage point to just 3.3 percent since the first quarter. “It’s definitely a very tight market,” said Chris Jackson, a senior vice president at NAI Capital Inc.’s Encino office. “And lease rates are starting to go up because a lot of people were buying before but now there’s nothing left to buy.” The market was given a reprieve when AMS Fulfillment Inc., a major distribution company, pulled back on its plan to put thousands of square feet up for sublease. New contracts were able to replace a contract with Santa Monica shoemaker TOMS Shoes that it lost in the first quarter, and the company was able to keep its existing space. Sales also slowed a bit after a surge of buy backs by owner-users, who seized on rock bottom interest rates during the recession. According to CoStar Group Inc., just one industrial property over 20,000 square feet is on the market. In the largest square footage sale of the quarter, manufacturer Canyon Engineering Products Inc. acquired a 116,325-square-foot building at 28909 Avenue Williams in Valencia from Westbrook, Conn. firm Lee Co. for an undisclosed price in late June. Canyon currently occupies more than 70,000 square feet of the building, and plans on expanding its operations, which will be merged with Crissair Inc., currently located in Palmdale. Both are owned by Esco Technologies Inc. of St. Louis. For now, the market is unlikely to loosen up, said Jackson. “It’s really tight, and there isn’t a lot of new construction planned right now,” he said. “Prices are going to be going really high with nothing for sale.” – Kelly Goff Main Events – The 153,687-square-foot Gateway Village shopping center in Santa Clarita was acquired by Newport Beach real estate investment firm JH Real Estate Partners for $47.5 million from Stoltz Management Co. of Bala Cynwyd, Penn. It is the area’s highest-dollar retail sale of the year. – PVC components manufacturer King Bros. Industries Inc. sold a 75,055-square-foot industrial building at 29101 The Old Road in Castaic to Newport Beach investment firm TA Associates Realty. Financial terms of the sale-leaseback were not disclosed. – AMS Fulfillment Inc., a Santa Clarita distribution company, pulled back on its plan to put several hundred thousand square feet of industrial space up for sublease. New contracts were able to replace a contract with TOMS Shoes that it lost in the first quarter, and the company kept its existing space. – In the largest industrial sale of the quarter by square footage, manufacturer Canyon Engineering Products Inc. acquired the 116,325-square-foot building at 28909 Avenue Williams in Valencia from Lee Co. of Westbrook, Conn. for an undisclosed price. Canyon occupies more than 70,000 square feet of the building and plans on expanding its operations.

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