Medical Office Deals Give Shot in Arm to High Desert Market

Leasing and new construction of medical office space is helping to toss off sluggishness in the office and industrial real estate markets in the Antelope Valley. In the first quarter, the region including Palmdale and Lancaster had a 15.2 percent vacancy rate, a slight decrease from the 15.5 percent in the fourth quarter, according to data from Colliers International. Helping move things along: landlords dropped average asking lease rate to $1.58 a square foot from $1.82. But pent up demand for medical offices was a big factor too, especially space near the Palmdale Regional Medical Center that hadn’t gone leased the past year or so given uncertainties about health care reform, said Michael Dettling, a partner who handles medical space in the Los Angeles office of commercial real estate services firm Avison Young. “There are other projects ready to come out of the ground once the developers get financing,” Dettling said. In one deal, Dettling represented the landlord of a building at 40005 10th St. West in Palmdale that leased 19,279 square feet to the Family and Child Guidance Center, a Northridge nonprofit that provides child mental health care and family counseling, And in the Venture Commerce Center in Palmdale, a dentist with plans to manufacture a new substance for use in teeth fillings bought two office condos totaling 16,000 square feet for $883,000, said Dennis Marciniak, a vice president in the Woodland Hills office of DAUM Commercial Real Estate Services who represented the landlord. Marciniak also brokered the sale of a 13,500 square foot unit at the Venture Commerce Center that went for $168,000 in January. These deals, and others involving empty land in Palmdale, represent buyers wanting to gets space in areas of potential growth, he said. The Venture Commerce Center, for example, is not far from the Palmdale Regional Medical Center. “(Buyers) can pick them up at low prices before they start to go up,” Marciniak said. Elsewhere in the Antelope Valley there are other large-scale medical projects underway. Construction started in the first quarter on a comprehensive cancer center to be operated by City of Hope at 15th St. West and Avenue J-5 in Lancaster in partnership with the public 420-bed Antelope Valley Hospital. Also going up are Kaiser Permanente’s 100,000-square-foot specialty medical complex in Lancaster, and the $142-million High Desert Health System Multi-Service Ambulatory Care Center by Los Angeles County. One challenge facing the region, however, is mandatory federal budget cuts, or sequestration, that could hurt the aerospace industry. Avison Young had been working with an aerospace company on leasing 20,000 square feet of office space but that has been put on hold. “I do not know if that is going to happen or not,” Dettling said. In the industrial market, there were 10 lease deals and two sales totaling more than 4.5 million square feet during the first quarter. The vacancy rate was 3.8 percent, down from 4.5 percent in the fourth quarter. The monthly average asking lease rate held at 45 cents a square foot, according to Colliers. In the retail market, one of the larger deals was the $8.5 million purchase by Forest City Enterprises Inc., of Cleveland, of the free-standing former Gottschalk’s building at the Antelope Valley Mall. The seller was Spanish real estate company El Corte Ingles S.A. Forest City owns the mall’s main building. – Mark R. Madler Main Events Child and Family Guidance Center expanded its presence in the Antelope Valley by leasing 19,279 square feet at 40005 10th St. West in Palmdale. The eight-year lease is valued at $4 million. The Northridge nonprofit will move from its existing Antelope Valley offices on East Palmdale Boulevard. The center offers child mental health care and family counseling. Forest City Enterprises Inc. added to its holdings at the Antelope Valley Mall by purchasing a free-standing building formerly occupied by retailer Gottschalks. The Cleveland-based developer purchased the 96,000-square-foot building for $8.5 million, or $89 a square foot. The seller was El Cortes Ingles S.A., of Madrid. Calabasas property management firm Griffin Industries Inc. acquired a 16,600 square foot building at the Fox Field Business Park in Lancaster. Griffin purchased the property from U.S. Bank N.A. in San Diego for $805,000, or $48 a square foot. Emerald Cascade Restaurants Systems Inc., in San Diego purchased a Jack in the Box restaurant at 570 Rancho Vista Blvd., in Palmdale. Emerald Cascade, which owns other Jack in the Box locations in the western U.S., paid $1.2 million for the 16-year-old, 2,800 square foot restaurant. The seller was GE Capital Franchise Finance Corp., of Scottsdale, Ariz.