Bad Time for Rent Hikes at VNY Airport

This is the Valley Industry & Commerce Association’s (VICA) monthly column for the Business Journal. VICA is a business advocacy group representing the San Fernando Valley and surrounding areas. As offices and storefronts sit vacant across the Valley and building owners struggle to retain tenants, one landlord in the City of Los Angeles is actually considering rent increases. Los Angeles World Airports (LAWA), the Los Angeles city department that owns and operates LAX, LA/Ontario International, LA/Palmdale Regional and Van Nuys (VNY) airports, is examining the possibility of rent hikes at VNY. Ranked as the world’s busiest general aviation airport, VNY averages 400,000 takeoffs and landings annually and the 730-acre property is home to more than 100 businesses. The airport is a crucial component of the entire Southern California airport system, meaning that changes to the services provided at VNY would have wide-reaching regional impact. VNY is a powerful economic engine for the Valley and the southern portion of the state, but not immune to the same problems that plague businesses across the nation. The tenants at VNY face challenges presented by difficult economic conditions and industry-specific struggles as they work to meet private, corporate and government aviation needs. These businesses create jobs, contribute more than a billion dollars each year to Southern California’s economy and provide critical emergency services for the region. VNY tenants are significantly contributing to the local economy and need a landlord that is considerate of the obstacles they face. These businesses are far too important to the overall economic success of the region for their viability not to be a factor in determining rental rates. Vacancies at VNY would leave gaps in general aviation service not just at the airport itself, but across the state. As LAWA enters the lease negotiation and rent-setting process it must balance its need to recoup operating costs with maintaining the airport’s ability to retain and attract tenants. Recognizing that LAWA and the City of L.A. are just as impacted by the adverse economy, it is still not in anyone’s best interest to increase rents to the point that businesses are forced to relocate or close. Raising rents above market value is not the solution. If LAWA attempts to stretch the pocketbooks of these companies it will not only be a loss for the businesses and their employees, but for the city and the region as a whole. The closures of businesses at VNY would strain the resources of all LAWA airports and other facilities across Southern California. The City of Los Angeles and its departments cannot fix its financial situation by transferring the load to the business community. It must instead find a balance that ensures its revenue sources are preserved in order to allow for long term sustainability. LAWA officials must consider the larger picture as they review rental agreements and reach a conclusion that benefits the entire region’s aviation industry. Aside from the federal, state and local laws that govern negotiations, these decisions impact the livelihood of employers and employees. This is a time when businesses are finding creative ways to do more with less. Government should look for ways to do the same rather than passing on the burden to businesses that are already strapped for cash. The city and state’s bad habit of tapping the business well must stop before they suck the entire well dry. Are other landlords attempting to raise rents during the economic downturn? What are landlords doing to help keep their tenants? Email your responses or thoughts about the column to [email protected].