Some high-value sales and a continued decline in vacancies helped further the Santa Clarita Valley office market’s recovery.
Vacancy during the fourth quarter fell to 14.8 percent, down 6.2 points from the year-ago quarter, as tenants took 16,100 square feet off the market, according to data compiled by Colliers International.
“We are seeing more activity than we have seen in the past couple years,” said Ryan House, vice president at Jones Lang LaSalle Inc. who focuses on the Santa Clarita Valley. “I think 2014 was a better year than most other years.”
What’s more, a good chunk of the vacant space in the 2.1 million-square-foot office market is located at one building on the outskirts at 17901 Soledad Canyon, which has about 100,000 square feet available. That has skewed the numbers in the submarket, according to House.
“If you were to extract that one building, our vacancy is basically sub-12 percent, which is always a great sign,” he said.
In fact, the market has tightened up so quickly that the only place a tenant will be able to find a space for 30,000 square feet or more now is in one building at 27249 Turnberry Lane while just a year ago there may have been up to five options.
Arty Maharajh, vice president of research at brokerage DTZ’s downtown Los Angeles office, said that’s not surprising since vacancy has been contracting in Santa Clarita since about 2011.
“For tax incentives, lower rent, better quality of space or a number of reasons, folks are moving there,” he said. “There’s organic and new growth that have helped these past years of recovery.”
Among the most notable, Sunkist Growers Inc. left its longtime Sherman Oaks home during the previous quarter and moved into new quarters at 27770 N. Entertainment Drive, a building it bought for $22 million in 2013.
To keep the Santa Clarita area attractive, landlords kept Class A asking rates steady at $2.33 a square foot, according to Colliers. But investors clearly think there is room for rates and values to rise.
Take the sale of 27027 Tourney Road. New York’s American Realty Capital Global Trust Inc. bought the 226,441-square-foot property for $96 million, or $424 a square foot, from Clarion Partners in New York in December. It was the fourth largest sale in Los Angeles County last quarter.
American Realty Capital is a real estate investment trust focused on sale-leasebacks in single tenant properties, and the property includes a medical lab and office facility occupied by Quest Diagnostics, a large medical testing company based in Clinton , N.J.
“It’s illustrative of how Santa Clarita has recovered,” said Maharajh. “It goes to show people are bullish on Santa Clarita.”
That’s not the only sign. In a larger portfolio deal, downtown L.A.’s Oaktree Capital Management and Valencia’s Intertex Properties came together to buy the Mann Biomedical Park at 25141 Rye Canyon Loop, owned by Alfred Mann, along with a second business park in Sylmar.
The Valencia park is occupied by medical and biotechnology firms such as Boston Scientific Corp. and Bioness Inc. as well as the Alfred Mann Foundation. The new owners plan to make improvements to the property and continue to operate it as a medical and research and development property.
The size of those property sales says a lot about what may be in store for Santa Clarita Valley’s future.
“Over the next year we will see an increase in rental rates, both in Class B and A, and less tenant improvements and free rent associated with lease signings,” House said.
– Jacquelyn Ryan
New York’s American Realty Capital Global Trust Inc. bought a 226,441-square-foot property at 27027 Tourney Road for $96 million, or $424 a square foot, in the fourth largest deal in Los Angeles County last quarter. Diagnostic testing company Quest Diagnostics occupies the property, sold by Clarion Partners in New York.
The Wendy’s restaurant at 27544 The Old Road in Valencia was sold for $4.5 million, or $1,173 a square foot, by LNR Restaurant Partners GP to Sunny Wang LLC in October. Wendy’s has 18 years remaining on its lease at the 3,835-square-foot property.
Valencia’s Intertex Properties and downtown L.A.’s Oaktree Capital Management bought the Mann Biomedical Park at 25155 Rye Canyon Loop from billionaire Alfred Mann for $112 million in November. The purchase price includes a second park in Sylmar, which together total 19 parcels.
Santa Clarita’s first Audi dealership opened at 23923 Creekside Road in Valencia, about eight months after it was built. The $10 million, 22,000-square-foot development replaced a Chrysler Jeep dealership
Seco Canyon Village shopping center at 28911-27983 Seco Canyon Road near Copper Hill Drive was sold by HA Seco SWAC LLC in a 1031 exchange to an undisclosed buyer who paid all cash. The 42,000-square-foot center is nearly 90 percent occupied and anchored by CVS Pharmacy.
Santa Clarita Valley
Office Market At a Glance
Inventory 2.07 million square feet
Under Construction 0
Class A Asking Rents $2.33