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.

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.

Q3 2013 San Fernando Valley Office & Industrial Market Report

Leasing Activity Takes a Breather and Fundamentals Show Marked Improvement  

Leasing activity fell back a bit as the office market absorbed the considerable space leased over the last four quarters. A total of 898,773 square feet of office space was leased, down 22 percent from the prior period and off roughly by the same amount compared to the year-ago period.

You might say it was bound to happen as the market absorbed nearly 2.7 million of square feet leased in the first half of the year. Indeed, vacancy rates fell to 16.7 percent in the quarter, down from 17.4 percent in the second quarter and 17.3 percent in the year-ago period. Even Warner Center, among the slowest submarkets to recover due to its relatively large inventory and its traditional tenant base of financial services firms, which were hardest hit in the recession, has seen its vacancy levels plummet. Last year at this time Warner Center’s vacancy rate was 17.3 percent, and as of the current quarter it stands at 13.8 percent.

As might be expected given the strong leasing activity for the better part of the year, absorption improved considerably in the quarter. A net 370,300 square feet of space was absorbed in the quarter, compared to negative 18,700 square feet in the second quarter and negative 40,200 square feet in the year ago period.

Asking lease rates rose to $2.27 per square foot from $2.23 per square foot in the prior quarter and $2.21 per square foot in the year ago period. It is the highest lease rate we’ve seen in the LA North market in six quarters. Although rates are still off dramatically from the high of $2.72 per square foot at the height of the last real estate cycle, there are some markets and buildings, especially in the Sherman Oaks submarket and some areas of Burbank that have pushed into the $3.00 per square foot range.

Only seven office buildings were sold in the quarter, however, on a year-to-date basis, the number of building sales so far in 2013 is ahead of the number sold in all of 2012, and median sale prices jumped dramatically. The median price of buildings sold in the quarter was $232 per square foot, 27 percent higher than last quarter’s $183 per square foot and a 23 percent increase over the year ago period.

Economy at a Glance

BUDGET: Bank of America Merrill Lynch sliced its domestic growth forecast for Q4 to 2 percent from 2.5 percent because of the government shutdown, according to a report in Bloomberg News. One example: Grant Thornton LLP put 120 of its 600 federal contract employees on hiatus, and said the shutdown was costing $500,000 a week because it continued to pay those workers without getting paid by the government.

SMALL BUSINESS: Revenue at companies with less than $10 million in sales increased 8 percent annually in the past two years, but the pace slowed by 2 percent so far in 2013, according to data from Sageworks reported in BusinessWeek.

HOLIDAY: A National Retail Federation poll found almost 80 percent expect to spend less during the coming holiday season. Respondents plan to spend $737.95 on gifts, décor and other holiday purchases, off 3 percent from last year when they shelled out $752.24, according to a story in the Los Angeles Times.

OBAMACARE: California’s new insurance exchange received 95,000 applications for health insurance in the first two weeks of open enrollment, according to a report in the Los Angeles Times.

RETIREMENT: A poll of American workers aged 50 and above by the Associates Press-NORC Center for Public Affairs Research found four in five plan to keep working during their latter years, the Los Angeles Times reported. The results indicate that traditional retirement is out of reach for many, the survey found.

Activity Surges, Driving Vacancy Levels Down And Lease Rates Up

A flurry of leasing activity in the third quarter drove up absorption rates and pushed vacancy rates down as the industrial market continues to show resiliency and strength.

Nearly 1.5 million square feet of industrial leases were transacted in the quarter, a 32 percent increase over the prior period when about 1.1 million square feet of space was leased, but somewhat less than the 1.8 million square feet of leases signed in the comparable period a year ago.

The activity pushed vacancy levels down 30 basis points to 4.4 percent from 4.7 percent in the prior quarter and absorption has vastly improved, compared to the prior quarter as well as the year-ago period.

Nearly 387,000 square feet of space was absorbed in the quarter, up from negative 77,000 square feet in Q2 and up dramatically from the third quarter of 2012 when 230,000 fewer square feet were leased than were vacated in the region.

The continued strengthening of the market is slowly pushing lease rates up. The average direct asking rate was $0.62 per square foot in Q3, up from $0.60 per square foot in Q2 and Q3 2012. Currently rates are at their highest levels since the fourth quarter of 2009, and the increases are even more dramatic in smaller size ranges. The average lease rate for buildings in the 5,000 – 10,000 square foot range was $0.72 in the quarter, and it was $0.66 per square foot for buildings ranging from 10,000 square feet to 20,000 square feet.

With a limited inventory supply, we are seeing more owners opt to purchase their facilities as a way to ensure that they have the space they need for their operations, control costs and avoid costly relocation, and industrial building sales have been brisk as a result.

A total of 25 industrial buildings were sold in the quarter at a median price of $119 per square foot, the highest per square foot price registered for industrial buildings in the region since Q2 2009. Although the number of building sales was down from the prior period, when 34 industrial buildings changed hands, the data indicate that fewer distressed sales are taking place. Only one of the sales that took place in the current quarter was an REO, compared with the prior quarter when 17 percent of the building sales were distressed assets.

Economy at a Glance

BUDGET: Bank of America Merrill Lynch sliced its domestic growth forecast for Q4 to 2 percent from 2.5 percent because of the government shutdown, according to a report in Bloomberg News. One example: Grant Thornton LLP put 120 of its 600 federal contract employees on hiatus, and said the shutdown was costing $500,000 a week because it continued to pay those workers without getting paid by the government.

HALLOWEEN: Nearly 66 percent of adults celebrate Halloween, resulting in some $6.9 billion in sales, according to a survey by the National Retail Federation reported in BusinessWeek.

E-COMMERCE: U.S. spending by online shoppers reached $290 billion in 2012, and is expected to reach $500 billion by 2020. The growth is creating dramatic changes in the way industrial warehouse space is used and configured, according to a report from DHL Supply Chain, said National Real Estate Investor. Although retailers are still looking for the right formula, strategies include building smaller regional warehouse centers and converting a portion of retail stores to fulfillment centers.

SMALL BUSINESS: Revenue at companies with less than $10 million in sales increased 8 percent annually in the past two years, but the pace has slowed in 2013, according to data from Sageworks reported in BusinessWeek. Sageworks found sales at these companies are running 2 percent less so far in 2013.

Woodland Hills Office - Carlton Plaza Impressive Lobby

Carlton Plaza office in Woodland Hills welcomes you to the newly remodeled lobby. The moment you step inside this class A office building, the modern décor welcomes you and your guests to Woodland Hills premier office building on Ventura Boulevard.

Carlton Plaza office in Woodland Hills understands that managing office building in the most efficient way mutually benefits both office tenants and landlords.  We pride ourselves in keeping up with the latest knowledge and practical applications in modern building technologies and infrastructure.  In the remodeling process of the lobby, healthy indoor environments was to be priority on the list of recognized points of interest.  Our human senses play a large role in determining the quality of our environment.  Visually, the lobby’s natural color tones and touches of wood elements with natural lighting against the white seating areas and dark accents, creates a smooth transition from outdoors to an indoor environment. The high ceilings at the entrance creates efficient utilization of useable space with a sense of more open space than actual.  The modern touches of building lighting that project soft light tones blends with the natural lighting in an efficient manner.  Also to include, the latest addition was the interactive touchscreen building directory.  The digital directory is an efficient system informing and managing visitors to navigate though the tenant directory, management, leasing contacts, and additional amenities available in the building.  We hope to see you on your next visitation or leasing opportunities as they arise.

http://woodlandhillsoffice.com/2013/09/28/carlton-plaza-office-woodland-hills-office-impressive-lobby-ventura-boulevard/

http://woodlandhillsoffice.com/2013/04/16/carlton-plaza-office-new-lobby-new-look/

What is happening in the office leasing market?

I recently attended a round table lunch discussion with Douglas Emmett in Woodland Hills. The meeting took place in their last remaining full floor availability at the Warner Corporate Center near Victory Boulevard and Canoga Avenue. The office space presented very well while the views of Warner Center was clear as day utilizing the office’s full window line and natural lighting. The turnout among active brokers in the area was successful and the discussion moderated by David Hitzel (Regional Manager –Leasing) from Douglas Emmett was very informative as majority of the brokers affirmed the general consensus about Tenants and Landlords in the marketplace.

“We are seeing that Landlords are giving less concession while larger Tenants have fewer choices.” (Broker)

The pace of demand for office space the San Fernando Valley is being funneled from the west Los Angeles markets. The east and central valley including Studio City, Sherman Oaks and Encino continues to see very strong demand while the west valley is still catching up. The tech boom in the west Los Angeles markets has lead way to fewer options of quality office spaces to lease.  As a direct result, Tenants are looking to the central valley along the 405 and 101 corridors as available office spaces are slim. This has resulted in a higher demand for office space and increased rental rates in those areas.

“We expected to see this improving trend towards the Woodland Hills market as the demand for office space continues to extend down the 101 freeway.” (Broker)

“Still we haven’t notice any large hiring in the local area.”(Broker)  Although the office momentum seems positive, new full time job creation continues to be sluggish as this continues to be a major concern for real growth in the local economy.

Carlton Plaza Office - Suite 204 -Woodland Hills Office Available For Lease

Woodland Hills Office Available for Lease - Eric Nishimoto - 818-223-4388 Lee & Associates - LA North/Ventura, Inc.
http://woodlandhillsoffice.com

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Suite 204 has 3 window offices(one large window office can be used as a conference room), 1 interior office, filing area with built in cabinets, work station area/bull pen with natural light from large window, reception room and private waiting area.

Carlton Plaza is located at 20750 Ventura Blvd., Woodland Hills. Directly across the street from Target near DeSoto and Ventura Boulevard.

Servicing the Los Angeles County & Ventura County and surrounding areas of the San Fernando Valley & Conejo Valley: Chatsworth, Canoga Park, Winnetka, West Hills, Woodland Hills, Warner Center, Reseda, Van Nuys, Granada Hills, North Hills, Northridge, Porter Ranch, Tarzana, Encino, Sherman Oaks, Valley Village, Studio City, Lake View Terrace, Lake Balboa, Shadow Hills, Sun Valley, Sunland, Tujunga, Toluca Lake, Valley Glen, North Hollywood, Sylmar, Van Nuys, San Fernando, Arleta, Panorama City, Pacoima, Burbank, Glendale, Hidden Hills, Calabasas, Agoura Hills, Westlake Village, Newberry Park, Thousand Oaks, Oak Park.

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AMC WOODLAND HILLS, CARLTON PLAZA, COMMERCIAL REAL ESTATE, ERIC NISHIMOTO, INSURANCE, LEASE OFFICE, LEASE OFFICE SPACE WOODLAND HILLS, LEE AND ASSOCIATES, OFFICE SPACE, OFFICE SPACE FOR LEASE, RENT OFFICE, TARGET WOODLAND HILLS, VENTURA BOULEVARD, WARNER CENTER, WEATHER WOODLAND HILLS, WOODLAND HILLS APARTMENTS, WOODLAND HILLS CA, WOODLAND HILLS CALIFORNIA, WOODLAND HILLS CHURCH, WOODLAND HILLS KAISER, WOODLAND HILLS MALL, WOODLAND HILLS OFFICE SPACE, WOODLAND HILLS SCHOOL, WOODLAND HILLS ACADEMY

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Carlton Plaza Office For Lease

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