With the development of new office space lagging well behind economic expansion, tenants were hard pressed to find suitable space in the San Fernando Valley during the first quarter of 2000. When they did, they were likely to encounter rent hikes. All Valley submarkets posted vacancy rates below 10 percent by the end of the first quarter, according to Grubb & Ellis Co. And the tightest submarket is the Conejo Valley, where the office vacancy rate fell to 6.0 percent, down from 9.6 percent three months earlier. “When you have a vacancy rate that low, there is nothing to absorb,” said Regina Burke, client services manager for Grubb & Ellis. The decline in the Conejo Valley’s vacancy rate was caused by a number of major deals. Xircom Inc. leased a 200,000-square-foot build-to-suit at Conejo Spectrum in Thousand Oaks. Homestore.com leased a 137,000-square-foot facility in Westlake North Business Park, and Conexant leased 60,000 square feet of space in Newbury Park. Three tenants The Ryland Group, VPA Inc. and Poms & Associates together accounted for about 160,000 square feet of activity in the newly built Calabasas Park Centre. Most of the leasing activity that occurred in the other submarkets was restricted to smaller deals, many under 10,000 square feet, and their vacancy rates actually rose a bit. But some of those upticks were due to new buildings coming on line, rather than tenants moving out. The West Valley submarket’s vacancy rate, for example, climbed to 9.8 percent from the prior quarter’s 6.6 percent because the new 21st Century Insurance Co. headquarters building added about 100,000 square feet of new space to the market. (21st Century is only occupying about 70 percent of the building.) “Every time you add a new building, the (vacancy) rate is going to go up,” Burke said. In addition to the new space hitting the market, West Valley office tenants vacated 7,159 more square feet of space than they moved into during the first quarter, but industry sources said that won’t persist. “Next quarter, I would expect the West Valley to have a really healthy absorption rate,” Burke said. Bill Inglis, first vice president with CB Richard Ellis Inc., added: “In Woodland Hills, I have four offers on the same space in one building. A lot of people are chasing the same space.” Inglis said he and other brokers are regularly receiving two offers on space openings. Vacancy rates remained relatively flat elsewhere in the Valley. The East Valley saw levels of 9.2 percent in the first quarter of 2000, compared to 8.6 percent in the final quarter of 1999. The Central Valley saw vacancy rates of 9.6 percent in the most recent quarter compared to 9.1 percent in the prior quarter, according to Grubb & Ellis. Less than a year ago, brokers were predicting that lease rates, which climbed 15 percent and more in some markets during 1999, would stabilize, but the dearth of space is pushing up rates further still. The largest percentage increase occurred in the Central Valley, where the average monthly class-A asking rate jumped by 12.5 percent to $2.07 a square foot. Conejo Valley asking rents are even higher, on average, jumping 8.4 percent to $2.20. In the West Valley, which experienced the largest rent increases last year, the average asking rent surged ahead by 8.2 percent to $2.38 a square foot. Brokers said there would likely be further increases in rental rates due not only to the tightness of the market, but also because of new buildings expected to open in the coming year. “It is rare to have double-digit (rent) increases back to back, but it can happen,” said Burke. “Also, when you build new buildings, that’s going to revise the average asking rent (upward).” Racing Ahead Ubet.com, a horse racing information and wagering Internet company, signed a lease for 30,093 square feet of office space at 5901 De Soto Ave. in Woodland Hills. The 10-year lease is valued at $8 million. Ubet.com will be relocating its offices from West Los Angeles. The company will occupy the entire single-story building. Richard Abbitt with Lee & Associates represented the tenant. Bill Inglis, with CB Richard Ellis represented the landlord, Ronald G. Cox. LAUSD in Van Nuys The Los Angeles Unified School District has signed a 20-year lease for a build-to-suit that will house maintenance and storage facilities for the agency’s buses at Woodley and Roscoe avenues in Van Nuys. The seven-and-a-half-acre site is part of a 19-acre parcel acquired by Realty Bancorp Equities last May. Realty Bancorp is currently constructing two buildings, an 18,000-square-foot facility and a 40,000-square-foot facility, that will be used for light maintenance and an administration building. There will also be a California Highway Patrol facility located on the premises, said Patrick Ayau, a partner with Realty Bancorp. The lease is valued at $3 million. Construction on the other portion of the parcel was completed in December. That facility, a 286,000-square-foot building, houses Hydra Warehousing & Construction, a glass manufacturer. Calabasas Deal New Century Financial LLC leased 15,367 square feet of office space at Malibu Canyon Office Park in Calabasas. The five-year lease is valued at $1.8 million. The company, based in Irvine, is adding the office due to expansion. Bill Inglis represented the tenant. The business park, owned by Malibu Canyon Office Partners, represented itself. News & Notes Two law firms will join the roster of tenants at Calabasas Park Center, the Kilroy Partners development opening this summer. Snyder Dorenfeld & Tannenbaum leased a 4,334-square-foot office space and Stephen H. Heller & Robert M. Tessier leased a 3,862-square-foot space. Bill Inglis represented the landlord in both deals. Sheryl Mazirow at Grubb & Ellis represented Snyder Dorenfeld & Tannenbaum. Keith Green at Daum Commercial represented Heller & Tessier. Staff reporter Shelly Garcia can be reached at (818) 710-2731, ext. 4316 or at [email protected].
