2020 marks a new decade – and possibly a turning point for the commercial real estate market. While the Valley’s developers and brokers report a robust market now, economists expect slower growth this year and a few clouds are forming on the horizon — including a presidential election, a softening of the residential market and talk of a plateauing economy or even a recession. This Special Report looks at major local projects online or in development that will impact local markets by year’s end. Office The biggest deal in the Tri-Cities market is the Gehry Partners-designed “Iceberg” buildings at AT&T-owned Warner Bros.’ Burbank Studios. The funky-looking twin office towers, which will hug the 134 freeway when completed by 2023, drew a slew of notables to the Jan. 14 groundbreaking, including master architect Frank Gehry, developer Jeffrey Worthe of Worthe Real Estate Group, Warner Bros. Entertainment Chief Executive Ann Sarnoff, California Gov. Gavin Newsom and Burbank Mayor Sharon Springer. Worthe Real Estate Group is developing the site with Stockbridge Real Estate Fund. “This is a big deal,” Newsom told a crowd of nearly 300 gathered on the Burbank Studios lot. “Not just to Burbank but to the entire region.” Springer, who promised that, thanks to this endeavor, Burbank will join the ranks of downtown Los Angeles, Barcelona and Shanghai as metropolises with iconic Gehry buildings, added that some 12,000 housing units are going to be created during the next 15 years that will provide the workers a place to live. Also as part of the deal, Worthe and Stockbridge purchased three office buildings currently owned by Warner Bros.— Triangle Building (4001 West Olive Ave.), Glass Building (3903 West Olive Ave.) and Wood Building (111 N. Hollywood Way) — as well as the 30-acre Warner Bros. Ranch located on Hollywood Way. Occupancy of Phase I is slated for 2022 with Phase II occupancy unfurling the following year. In the leasing arena, The Park Calabasas, developer Rising Realty Partners’ freshly minted 20-acre property at 4500 Park Granada in Calabasas, shows the continuing appeal of the suburban campus format. The property has shored up 100-percent occupancy with a 50,000-square-foot office lease to AmaWaterways, one of the world’s leading river cruise lines. “We are excited to move into our new home at The Park Calabasas in June as it offers a stimulating green environment in line with our vision that wellness and sustainability are important aspects of a productive and healthy work-life balance,” said AmaWaterways President Rudi Schreiner in a statement. Some of the big question marks of 2019 have lingered into 2020. The biggest mystery is what Triple Five Worldwide intends to do with 47 acres of long-vacant prime Warner Center land. Triple Five, which owns the biggest indoor shopping center in the United States, the Mall of America, has remained cagey about its intentions as it takes care of environmental treatment of the former Rocketdyne site. The Canadian company specializes in massive retail centers, which would seem superfluous next to Unibail-Rodamco-Westfield’s malls in close proximity. That leaves hospitality, residential or office product as potential usages for the land. While community activists kicked off the new year by vocalizing their discontent with the level of environmental treatment taking place at the site, Triple Five publicist Coby King of Vectis Strategies told the Business Journal that there is no update on the project at this time. A stone’s throw away at 21555 Oxnard St. in Woodland Hills, not much appears to be happening with the recently vacated big-box office building known as the Warner Landmark, which, since its 1977 opening, has been the home of single tenant Anthem Blue Cross. However, as of last month, the building became available when the health insurer relocated to its new Warner Center address at 21215 Burbank Blvd. Last April, CBRE Group’s Matthew Heyn told the Business Journal that Anthem’s move out would become a major opportunity for owner Abraham Lerner, redevelopment firm Lincoln Properties Co. West and CBRE to reposition the property. “We’re definitely targeting entertainment and tech,” Heyn told the Business Journal. “Those two are major drivers, but really any tenant of size that is looking for efficiency that you can’t find anywhere else in the Valley.” The remodel project was originally slated to be finished by mid-2020 at an estimated cost of $50 million. However, as of press time, work on the building does not appear to be underway. Across the Valley in Glendale, the 2019 assumption by ServiceTitan of four floors of vacant space at 800 N. Brand promises improvement for the submarket in 2020. The space was previously occupied by Nestle USA. “The Nestle exodus actually has helped improve the complexion of the market – what was once back office, traditional corporate America has been replaced by more dynamic industries led by high-growth companies focused on attracting and retaining talent,” CBRE’s Cody Chiarella told the Business Journal last May. “The tenant mix (in Glendale) is becoming more diversified and creative, e.g. DreamWorks, (Amazon Inc.-owned) Whole Foods, Age of Learning, LegalZoom, Industrious; the boom of luxury multi-family developments in the central business district; and the retail anchored by the Americana and Galleria has put Glendale on the map as a 24/7 lifestyle submarket.” Retail Fresh retail space is percolating at The Vineyards at Porter Ranch, a major mixed-use project spearheaded by Shapell Properties in the West Valley that has already seen last year’s roll-out of a retail center anchored by a Whole Foods and a Nordstrom’s, plus a Kaiser Permanente facility. “We have quite a few milestones on tap for 2020, including opening for the AMC Theatres, various restaurants and retailers – and the first phase of the apartments will be available for occupancy in the fall,” Shapell Properties Chief Executive John Love told the Business Journal. “The Kaiser medical building has been open and operating since July.” This year will also mark the start of construction of the mixed-use site’s Hampton Inn Suites, which currently has an uncertain completion date. Expect to see a slew of new businesses in-filling the Vineyards’ 200,000 square feet of retail shopping retail center, including Finney’s Craft House, Gus’s BBQ, Lure Fish House and Patxi’s Pizza. In the retail sector, as indoor malls find it increasingly difficult to stay alive, they have taken unconventional businesses as tenants in so-called “creative adaptive” space, a trend we’ll see more in coming years. Two years ago, California Museum of Art Thousand Oaks moved into the Oaks retail center at 350 W. Hillcrest Drive in Thousand Oaks, owned by Macerich. The museum’s past chair Tony Principe, president at development company Westcord Commercial Real Estate Services, said the arrangement has worked for both landlord and tenant. “Malls are now looking for different reasons to attract people,” Principe told the Business Journal. “We don’t really sell a product. We sell an experience. Macerich understood that. … Having gyms and hotels and schools and malls and museums will put people there and keep them there.” The museum has increased foot traffic after assuming space formerly occupied by a Baby Gap store. Macerich just announced that it will pursue building a 121-key hotel near the Oaks mall. Industrial A question mark hanging over the current industrial market is which tenants will next move into Tejon Ranch Commerce Center, where L’Oreal is just moving after signing a lease for 480,000 square feet last year. A new building saw prospective tenant Next Level about to move into some 189,000 square feet. However, the Carson company backed out and that entire building is now available again. Meanwhile at Tejon, East Coast firm Covington Group bought the 606,000-square-foot building occupied by Dollar General as an investment. John Erickson, senior vice president of Brokerage Services at Colliers International’s Valencia office, said the top talk of the industrial street is Needham Ranch in the Santa Clarita Valley, where “some of it has come to market (such as) Illumination Dynamics while two or three more buildings will come online before year’s end.” Also in Santa Clarita, at IAC Commerce Center, there is a 134,000 square foot building complete, another 156,000 square feet underway, and three more buildings planned. Some of those buildings will be open for business before year’s end. Soon in Simi Valley, Xebec will break ground on a project on Easy Street. “You’ll see that get started later this year,” Erickson said. Heading into 2020, “it’s more of the same,” said Woodland Hills-based Newmark Knight Frank industrial broker John DeGrinis. “The big topics are continued lack of availability and continued lofty pricing.” A few big names, DeGrinis said, such as Amazon, Inc. and Walmart, are “executing to achieve (their) goals and moving forward.” Where the local industrial scene is starting to experience problems with its lack of inventory is in entertainment. There aren’t enough venues to handle the current demand for content production. Studios generally need “purpose-built” hangar space, as DeGrinis called it, to suit their specific needs for television production. However, there’s not enough such existing structures in the San Fernando Valley and its surrounding submarkets. While there are the conversions of conventional warehouses into soundstages, “it’s a less ideal scenario but because they hang so much stuff from the roof, it’s more ideal to have a better purpose-built scenario,” DeGrinis said. With 530 television shows created last year, the demand on Hollywood has never been greater, DeGrinis said. How to keep up demand for production facilities as the streamer wars heat up with Warner Bros. and Universal joining Netflix, Amazon and Disney in the fray, “that’s the challenge the industry is trying to figure out,” said DeGrinis, as productions head out of state to places such as New Mexico and Louisiana where more space is available. Also driving industrial in 2020 will be Amazon, Inc.-led e-commerce and manufacturers who are “trying to figure out how to become more efficient,” DeGrinis said. “The other active segment in the market is food-related.” For example, Chick-Fil-A recently opened a lemon-processing facility at one of the structures on the IAC Valencia campus in Santa Clarita. “They bought the building and ripped up the entire floor and invested $70 million worth of improvements,” DeGrinis said. Meanwhile, Monster Beverage Corp., maker of Monster energy drink, aggressively chased a 7-acre property that they had eyed in the city of San Fernando. “They ended up paying a crazy number because they had to have it,” DeGrinis said, referring to the $33.7 million acquisition of 510 Park Ave. “Food guys are also active in Ventura County,” DeGrinis added. “[Food-related companies] is a segment in which we see some growth.” In terms of the pipeline of new development, there are isolated projects being worked on in Thousand Oaks, Simi Valley and Oxnard. “However, we are long in the tooth in the market,” DeGrinis observed. “We’ve gone 10 or 11 years without a cycle change (and) California is losing one house seat, which means a shrinking population.” Multifamily This sector may be the hairiest and least straightforward, with many issues muddying the investment waters, from California property tax rules and rent control regulations to the overhaul of soft-story apartment complexes in time for the city’s 2022 deadline on retroactive earthquake fixes. But that’s for existing buildings. Plenty of residential development is currently underway which, if city officials and developers are to be believed, will become game-changers. The most ambitious of all housing projects will begin to unfold some 21,000 units in Santa Clarita Valley. On Jan. 13, Five Point Holdings, LLC announced the sale of 781 homesites at its Valencia development, which occurred in the fourth quarter of 2019. Long known by former name Newhall Ranch, Valencia has closed on 711 of these 781 homesites, and the balance is anticipated to close in the first half of this year. Proceeds from the closed homesites will total approximately $135 million, according to Five Point. “This is a milestone for the company, as we have been waiting for this day for a long time,” said Five Point Chairman Emile Haddad in a statement. “These are the first deliveries of the approximately 21,000 homesites anticipated to be delivered next in Valencia.” Attendant with this development will be 11.5 million square feet of commercial space, including health care and lifestyle-focused space. Additionally, Valencia is designed to be the first net zero greenhouse gas community of its size in the entire country, according to Five Point. An ambitious residential project of another stripe continues to push forward in Woodland Hills, as part of the collective Warner Center 2035 Specific Plan — championed by City Councilman Bob Blumenfield and other city officials — to transform the neighborhood into the downtown center of the entire San Fernando Valley. Developed by Canoga Park-based developer California Home Builders, the Q buildings — a network of five interfacing residential towers with compatible services and amenities will begin to come online this summer, when The Q on Variel will open. “All of the Qs are a network of buildings with different lifestyles – we’re going to provide valet parking, concierge, and coworking space in the building the tenants we’re going to open and operate,” said California Home Builders Chief Executive Shawn Evenhaim, who added that he will open a listing office in April for Q on Variel. “We already have a waiting list of people,” he said. “Our hope is that the first tenants will move there (this summer).” In nearby Reseda, Tarzana-based Gelt Inc. has aligned with Uhon Inc., the Pasadena-based American arm of China-based developer Shenzhen Yuhong Investment Group Limited Co., to build the $90-million Watermark Apartments — a five-story, 250-unit project at 6625 Reseda Blvd. designed for relatively affordable rents of $1,300 to $3,500 per month — currently under discussion. Although representatives of Gelt and Uhon could not be reached, Watermark is expected to come online by year’s end.
