Q3 2015 Ventura County Office and Industrial Market Report

Industrial Vacancy Rates Reached Their Lowest Levels Since Q2 2009 in Ventura County

After holding steady for two consecutive quar­ters, vacancy rates declined 30 basis points (bps) to 5.6 percent in the third quarter, the lowest levels since the first quarter of 2009 and an improvement of 80 bps over the year ago period.

Space has been filling at a steady pace for a number of quarters now, and absorption has also shown steady gains. In the third quarter, 225,000 square feet of space was absorbed, more than 130 percent more than the prior quarter but well below the 424,694 square feet of absorption in the year-ago period. A similar pattern is found in year-to-date ab­sorption which registered 734,200 square feet for the first three quarters of 2015 com­pared to 1,239,900 square feet in the first three quarters of 2014. However, it’s impor­tant to note that the most recent patterns compare very favorably to 2013 when the first three quarters of the year saw negative absorption of 271,000 square feet.

The relatively small size of Ventura’s industri­al market has traditionally led to fluctuations in leasing activity, although each quarter has brought a steady flow of new leases. A total of 555,725 square feet of space was leased in the third quarter, down from 908,111 square feet in the second quarter of the year and from the 863,247 square feet of space leased in the third quarter of 2014.

Average lease rates have also seen similarly inconsistent increases. The average lease rate for the third quarter was $0.65 per square foot, $0.03 lower on a per square foot basis than the average in the prior quarter but $0.02 more than the average of $0.63 per square foot a year ago. Nevertheless, at $0.65 per square foot, the region’s lease rate reached its highest level since Q1 2009.

As is the case in other industrial markets, sales activity has continued to rebound along with sale prices. Year-to-date there were 58 industrial building sales at a median price of $113 per square foot compared with a me­dian price of $106 per square foot in 2014.

Quarter-to-quarter, median sale prices have been ticking up for the past four quarters. In Q3 there were 22 buildings sold at a median price of $115 per square foot, up from $94 per square foot in Q4 2014.

Vacancy Levels Dipped Again in Q3 Driving Average Lease Rates Up $0.05 vs. the Year-Ago Period

Leasing activity was moderate in the third quarter, totaling 250,988 square feet, but the continued steady leasing in the region was enough to knock vacancy rates down. Third quarter office vacancies dipped another 10 basis points (bps) compared to the prior quarter to 14.4 percent and are now 40 bps below the year ago period.

It would appear that the continuing activity is bolstering landlord confidence, and in Q3 we saw another bump in lease rates to $1.97 per square foot from $1.95 per square foot in Q2, and a $0.05 per square foot improvement over the year-ago period.

Absorption rates continue to indicate that the Ventura County office market is taking two steps forward and one step back. In Q3 a total of 23,200 square feet of space was leased on a net basis, somewhat more than the 16,839 square feet of net leasing that took place in Q2 but short of the year ago period when 34,216 square feet of office space was leased on a net basis. Year to date, absorption remained in negative territory with 23,500 fewer square feet leased than were vacated.

Recent news that homebuilder Ryland Group will be closing its Westlake Village office at the end of the year following its merger with CalAtlantic Group Inc. likely reflects continued upheaval for the area’s office market.

The market snapshot is a bit different on the sales side. With brisk levels of sales activity and limited supply, building prices are escalating. A total of 41 office buildings traded year-to-date in 2015 driving a 35 percent increase in prices. Year-to-date, the median price of buildings sold in the region was $191 per square foot, up from $142 per square foot for the same nine-month period in 2014.

For the third quarter, 28 office buildings traded at a median price of $187 per square foot. That median price is down from the prior quarter’s $219 per square foot, but only seven buildings traded in the second quarter of the year.

In summary, fundamentals in the Ventura County office market are showing steady, if slow, improvement consistent with the region’s larger economy.

Lee & Associates-LA North/Ventura, Inc., a member of the Lee & Associates Group of Companies, is a full service commercial brokerage company with offices in Sherman Oaks, Calabasas, Ventura and Antelope Valley. LA North is celebrating its 20th anniversary this year. Additional in­formation is available at www.lee-associates.com.

Northridge Commercial Real Estate In Review 2014

Reflecting on 2014, Northridge commercial real estate was interesting as movement of property was healthy as compared to previous years.  To note, in October, the well known Black Angus Steak House on Corbin Avenue traded hands. The property was sold as an investment property to an individual for $3.9 million. The passive investment with leases through 2018 is situated on 1.66 acres with 106 parking spaces allowing for a variety of uses down the line. Corbin Avenue from Nordhoff north to Plummer Street has some real intrinsic value as real development possibilities within the vicinity will dramatically change the atmosphere.

Retail and Fast Food center such as on Corbin Avenue and Nordhoff across from Lowe’s have been getting a lot of attention and achieving high sales prices for the Sellers. Local passive single tenant NNN leased properties are in demand. Also to note the redevelopment of the Nordhoff and Reseda eating establishment corridor with the newly opened Starbucks.

With entertainment, the Northridge bowling alley on Balboa, Matador Bowl comes to mind. It only makes sense for a business operator to own the property. Financing for SBA and special Owner-User lending programs are supporting the higher values in real estate that typical passive investors are finding it hard to financially pencil out. Interest rates such as the 10yr treasury will continue to remain low with a possibility of slight increases over the next 2 years.

Health Care properties in Northridge, more particular assisted and senior living facilities has been active with REITS and equity partnerships in 2014.  Northridge Senior Living on Lindley Ave is one of two properties to note. However the newly built property located at 9222 Corbin – The Village at Northridge will be one to watch. I speculate, interesting additions to the property are to come in the next couple years.

The Northridge Post Office was traded under the radar.  Eyes on this property for future planning has not been overlooked. This property should be interesting to follow in the next 5 years as plans will be in the works to transform the property.

In mid October of 2014, the Northridge Businesses Center sold for almost $46.5 million. This property although located in an area that is transforming will be the catalysts for other similar outdated office and R&D parks to repurposing and reinvest. This property known as The Campus will be interesting to follow as revitalization takes place in this area of Northridge.

Q3 2014 Office and Industrial Market Report San Fernando Valley

Market Now Just Inches From Pre-Recession Highs as Dramatic Improvements in Absorption and Vacancy Levels Continue

The office market continued to make strong improvements in the third quarter with the highest absorption levels seen in several years, a dramatic drop in vacancy levels and healthy increases in median sale prices.

A total of 381,600 square feet of office space was leased on a net basis in the quarter, 85,562 square feet more than was absorbed in the prior quarter and the strongest absorption since the fourth quarter of 2012 when 396,740 square feet of net space was leased.

With strong absorption continuing now for five consecutive quarters, office vacancy rates fell another 60 basis points (bps) to 13.8 percent compared to the prior quarter, and are now nearly 200 bps below year-ago levels. Vacancies have been falling consistently for five quarters and in Q3 reached the lowest levels since Q3 2008.

Even Warner Center, where vacancies had reached peak highs during the recession and were very slow to recover, saw dramatic improvement with vacancy falling 130 bps to 13.1 percent in the quarter compared to Q2 and 140 bps compared to the year ago period.

Average asking lease rates seem to be recovering at a slower pace. Still, the average lease rate in the current quarter was $2.25 per square foot, down $0.01 from the prior quarter and an increase of $0.03 per square foot compared to two years ago.

Sales velocity has doubled since the height of the recession. In the year-to-date period, 33 office buildings changed hands driving the median price of buildings sold to $181 per square foot.

There were 13 office buildings sold in the third quarter at a median price per square foot of $251, compared to nine building sales at a median sale price of $181 per square foot in Q2.

Third quarter median prices were just 15 percent off their pre-recession highs of $295 per square foot in Q3 2007. Although sales velocity was far stronger in Q3 2007 with 36 buildings sold, it is important to note that the for-sale inventory in the Los Angeles North market is extremely constrained. In other words, sales velocity is limited not by demand but by the inventory available.

 Virtually No Room Left at the Inn-dustrial Table as Vacancies Tighten to 3 Percent

 To say that the industrial market continued its upward trajectory in the third quarter may be understating the case quite a bit.

Vacancies declined another 30 basis points (bps) in the quarter to 3 percent compared to the prior quarter and are now 100 bps below the already tight market of a year ago. In nearly half of the region’s submar­kets—Canoga Park, Glendale, North Holly­wood/Universal City; Northridge, Reseda/ Tarzana, Sun Valley and Woodland Hills – vacancies are sub-2 percent, offering very few options for tenants.

Average asking lease rates reached $0.65 PSF in the quarter, an increase of $0.01 PSF over the prior quarter and $0.03 more than the year ago period. Average lease rates have risen 16 percent since Q4 2011.

A total of 1,132,278 square feet of space was leased in the quarter, so far ahead of pre-recession levels that the year-to-date activity in 2014 (4,143,562 square feet) surpassed the full year activity in both 2007 (3,617,589 square feet) and 2006 (2,675,497 square feet).

Still, the current quarter activity was a con­siderable 45 percent below the year-ago period when 2,067,768 square feet of in­dustrial space was leased, and absorption slowed proportionately to 353,200 square feet, almost 143,000 fewer square feet leased on a net basis than in the compa­rable 2013 quarter and an indication that the tight market is having an adverse im­pact on these fundamentals.

As space becomes harder to find, we see a number of tenants opting to acquire fa­cilities when they find suitable buildings. There were 43 industrial buildings sold in Q3, a 68 percent increase over the prior quarter and 61 percent more than were sold in the year-ago period. The increased demand has pushed the median sale price of industrial buildings to $121 per square foot for the year-to-date period, an 11 per­cent increase over the median price of $109 per square foot in 2013. Although the median sale price for Q3 registered only $110 per square foot, that figure (and the year-to-date median) would likely be considerably higher had pricing been avail­able for 16 of the 43 buildings sold.

Freestanding Northridge Office Available for Lease

https://www.facebook.com/NorthridgeOf...

Full Video https://www.youtube.com/watch?v=NFUs2fTNZG0

9255 Corbin Avenue offers an open and clean atmosphere for a variety of custom floor plans such as a tenant looking for a creative office space or a traditional corporate layout with unique finishes. Ideas for both single and dual tenancy office spaces include efficient designs coupled with creative features. The high ceilings, open space and rear loading can be utilized or converted for a space that's both functional and customized to suite a specific business operation. The property has terrific window line along the perimeter of the building for natural lighting and a healthy working environment. Parked at a ratio of 3 per 1,000, the building can accommodate a variety of light and heavy employed office users looking for space in a convenient area of Northridge with a variety of local amenities. The building is located within the Los Angeles State Enterprise Zone and brings added benefits to industries looking to relocate their business or head quarters to this location.
This Northridge office space is located on the signalized corner of Corbin Avenue and Prairie Street and has great street exposure. 9255 Corbin Avenue is centrally located in Northridge with easy access to the 118 Ronald Reagan, 101 Ventura and 405 Freeways and just west of the Northridge Fashion Center (Northridge Mall). The location of this Northridge office building is a few minutes from Cal State University Northridge (CSUN) -- home of the Matadors and other major employers. A variety of amenities in Northridge include a variety of eating establishments at and near the Northridge Fashion Center, Northridge apartment and senior living centers and the Northridge Hospital Medical Center.

Northridge is located in the northwest San Fernando Valley just north of Los Angeles city, south of Santa Clarita and Valencia, east of Ventura County and in the Los Angeles County.
Cities located adjacent to Northridge are Winnetka and Reseda to the south, Porter Ranch to the north, Chatsworth and West Hills to the west and North Hills and Granada Hills to the east.
Major thoroughfares close by are Corbin Avenue, Tampa Avenue, Wilbur Avenue, Reseda Boulevard, Winnetka Avenue, Plummer Street, Nordhoff Street, Lassen Street, and Devonshire Street.

Q 1 2014 Office and Industrial Market Report San Fernando Valley

Q1 2014

Market Moves a Tad Slower in Quarter, But Longer Term Trends Remain Positive

The Los Angeles North office market quieted down somewhat in the first quarter, although leasing activity continued to exceed 1 million SF.

Vacancy levels remained unchanged at 16.2 percent compared to the fourth quarter, and have fallen nearly 100 basis points (bps) compared to vacancies of 17.1 percent in the same period last year.

Just over 1 million SF of office space was leased in the quarter, about 38 percent less than the 1,624,000 SF leased in Q4 and down from the year ago period as well. The slowdown in velocity seems to have impacted absorption during the quarter, but it’s equally important to note that leasing has been strong now for the past nine quarters, an indication that the recovery in the office market is proceeding at a pace consistent with the economic growth we are seeing.

Only 31,200 SF of space was leased on a net basis during the quarter, down significantly from Q4 when net absorption totaled 298,035 SF. However, over the past 12 months, 504,000 SF of space has been leased on a net basis, amounting to a solid 1.1 percent growth in occupied space over that period.

With that level of progress, developers are reentering the market. Although the 200,000 SF of office space currently under construction is probably insufficient to make any real impact on available inventory, it is indicative of a return of confidence. Not to be overlooked, Laurel Canyon Plaza, a 90,000 square foot office building in North Hollywood and a neighboring retail building, was acquired by Goldstein Planting Investments for redevelopment.

Indeed, the Allen Matkins/UCLA Anderson Forecast Commercial Real Estate Survey released late in January showed that sentiment in the office market is highest in Southern California. About 70 percent of the survey respondents in the region said they planned to commence one or more projects within the next 12 months.

Sales activity too slowed in the quarter with just 10 sales taking place, compared with 19 in the year-ago period. With fewer transactions, the median price of office buildings sold declined to $205 PSF in Q1 from $257 PSF in Q4 and $212 PSF in Q1, 2013. Still, several trophy properties changed hands including Tower Burbank and Westlake Park Place.

Industrial Absorption Rises to Pre-Recession Levels and Vacancies Fall Below 4 Percent

Following four quarters of robust leasing activity, absorption has risen to pre-recession levels and vacancy has fallen to the lowest levels the market has seen since 2009.

With little new construction and a resurgence of demand for industrial space, the upward trajectory of the Los Angeles North industrial market seems here to stay, at least for the time being.

Some 1,100,404 SF of industrial space was leased in the quarter, bringing vacancy levels down to 3.8 percent, the first time vacancies have fallen below 4 percent since the fourth quarter of 2009. Current vacancy levels have fallen 40 basis points (bps) compared with the prior quarter and year ago period, which both registered vacancies of 4.2 percent.

Not surprisingly, leasing velocity has slowed somewhat from the prior quarter when 1,475,538 SF of space was leased, as well as the year ago period when 1,824,794 SF was leased as options for businesses become extremely constrained. Eight of the 13 Los Angeles North submarkets now are operating with vacancy levels below 3 percent. In the North Hollywood/Universal City submarket, vacancy is 0.9 percent. In Northridge it is 1.2 percent and in Reseda/Tarzana it is 1.5 percent. Only the Antelope and Santa Clarita valleys show vacancy rates above 5 percent.

On a net basis, some 625,600 SF of industrial space was leased, more than in any quarter since the first quarter of 2006 when 645,688 SF of space was absorbed. Admittedly, we are still seeing some fluctuation in absorption rates, and negative 135,923 SF was registered in Q4, but given the solid leasing activity, the volatility is more likely due to the lapsed time between space leased and occupied.

Similarly the sales sector was more active than it has been in any first quarter since 2009 with 23 industrial buildings changing hands in the quarter. The median sale price rose 19 percent to $130 per square foot, compared with $109 per square foot in Q4.

Although there are still some distressed assets being cleared in the region, their numbers are minimal. In the current quarter, just two distressed properties changed hands, compared to six in the first quarter of 2013.

Q4 San Fernando Valley Office and Industrial Market Report

Vacancies Decline to Lowest Levels in More than Four Years as Leasing Activity Remains Brisk

Office leasing activity spiked again in Q4 to 1,359,421 square feet, the highest levels in the past four quarters. In all, 4.6 million SF of space was leased in 2013, the second straight year of solid activity. (Last year, 5.3 million SF of office space was leased in the region.)  

A total of 272,000 SF of office space was absorbed in the quarter, down 30.5 percent from 391,444 square feet in the prior quarter. For 2013, a total of 241,400 SF of office space was absorbed, also down from 2012 when just over 1 million SF of space was absorbed.  

While there is some evidence that at least a portion of the activity in the market represents tenants trading off one space for another, it is also clear that the market’s inventory of office space is slowly filling up.

Vacancies, which have been trending downward for over a year now, dipped to their lowest levels since Q1 2009. The vacancy rate in Q4 was 16.2 percent, an improvement of 50 basis points over Q3 and 40 basis points over the year-ago period. Vacancies in the Los Angeles North market have declined more than 200 basis points since Q4 2011.

With landlords still facing competition for tenants, we are not seeing the tighter vacancy rates reflected in rental rate growth. Average asking lease rates fell by $0.01 to $2.24 per square foot in Q4, and are up by $0.02 per square foot compared to Q4 2012. It is important to note however, that some submarkets are showing rates well in excess of those levels, and we are seeing variations from one building to the next, even within the same submarket, depending on individual factors impacting each property.

Sales activity picked up dramatically compared to 2012. A total of 49 office buildings were sold in 2013 compared to 2012 when 26 office buildings were sold. The median price of buildings sold in 2013 was $186 per square foot, however, the full-year median sale price was adversely impacted by the first half of the year, and prices have been increasing significantly since then. The median price of buildings sold in Q4 was $255 per square foot, a 12 percent increase over the prior quarter.

Economy at a Glance

INVESTMENT: Record highs in the DJIA index and strong stock market returns along with low inflation and minimal interest rate increases are driving near-record high real estate prices, according to a report in Commercial Real Estate Executive. The story cited $660 PSF paid for the Hollywood & Highland Center in L.A. among others.

RENTS: Brokers polled by National Real Estate Investor expect the national office market to shift in favor of landlords in 2014. On a national basis, the office market has registered occupancy gains for 14 consecutive quarters, vacancy fell to 15.1 percent and lease rates inched up 3.5 percent in the fourth quarter of 2013, CPE reported.

STUDIOS: Warner Bros. topped the worldwide box office in 2013 with $4.95 billion in sales. Walt Disney Co. was second with about $4.68 billion in sales and Universal City was third with $3.68 billion in worldwide sales.

RENEWALS: Companies are using lease renewals as an opportunity to downsize in order to conform to today’s workplace dynamics, National Real Estate Investor reported. The office space utilized per employee is estimated to have fallen to 172 SF from 255 SF in 2000 and estimates are that space used per employee will fall to 145 SF by 2018.

 

Extremely Tight Market Limits Options and Curtails Leasing Activity

Following three very busy quarters that removed a good deal of the industrial inventory from the Los Angeles North market, industrial leasing activity slowed in Q4, declining more than 60 percent compared to Q3 and off 22 percent from the comparable year-ago period.

A total of 943,620 square feet of industrial space was leased in the quarter, compared to 1,539,000 square feet in Q3 and 1,213,000 in the fourth quarter of 2012.

The strong activity that preceded the fourth quarter has brought vacancy rates down and limited options for businesses. Overall, the vacancy rate for the current quarter was 4.1 percent, unchanged from Q3. It is also noteworthy, however, that seven out of the 13 submarkets in the Los Angeles North industrial market finished the year with vacancy rates under 3 percent and vacancies were below 2 percent in several markets.

In Woodland Hills, where much of the industrial inventory has been converted to multifamily use, the industrial vacancy rate is 1.4 percent. Glendale’s vacancy rate is 1.7 percent and the North Hollywood/Universal City submarket has a vacancy rate of 1.9 percent.

Just 23,300 square feet of industrial space was absorbed in the region, compared with 488,300 square feet in Q3 and 551,766 square feet in the year-ago period. Chatsworth experienced the highest absorption rate for the year with 695,000 square feet of industrial space absorbed

With so little space available, asking rents rose to $0.63 per square foot in the quarter, a penny per square foot more than the prior quarter and a $0.03 increase over the year ago period. At $0.63 per square foot, asking rents are the highest they have been since Q3 2007 when the rate averaged $0.75 per square foot.

As the industrial market came back with a vengeance so too did sales activity. There were 86 industrial buildings sold in 2013, the largest volume of sales since 2006 when 118 buildings changed hands.

Median sale prices, however, are still lagging the activity we are seeing. In 2013, the median price of buildings sold was $109 per square foot, off 20 percent from the height of the last real estate cycle when the median industrial building price was $137 per square foot.

Economy at a Glance

GDP: The Commerce Department revised third quarter economic growth to 4.1 percent, the strongest growth in nearly two years, the New York Times reported. Previous estimates were 3.6 percent. The increase was attributed to a rise in healthcare, housing and cars as well as exports, state and local government spending and investment in new factories and inventories.

BENTLEY: A record 10,120 Bentleys were sold last year, the luxury maker’s best performance in its 95-year history, according to a report in Bloomberg Businessweek. Bentley said the stock market run-up fueled some of its sales increases, but the company also rolled out a new, lower priced model at the bargain price of about $200,000.

DEMAND: Industrial demand is expected to remain strong over the next two years, with availability rates nationally falling to 11.1 percent, according to CBRE research reported in GlobeSt. Researchers anticipate that the demand will drive rent growth of 4.4 percent in 2014 and 4.6 percent in 2015.

FILMING: L.A.’s location film production increased 19 percent last year to 6,972 days for features and 11 percent to 18,590 days for television, compared to 2012, the Los Angeles Business Journal reported. Commercial shoots were up 5 percent for the same period. The bad news? L.A.’s feature film production is down 50 percent from peak levels in 1996 and TV production is off 38 percent from its peak in 2008.

Q1 2012 Market Analysis Office Report San Fernando Valley

Q1 2012 Market Analysis Report Office (Click Here)

Q1 2012 Market Analysis Report Industrial (Click Here)