Industrial and office markets kicked off the year’s first quarter with significant new warehouse construction, robust medical office leasing and aggressive sales and leasing of traditional offices. In the San Fernando Valley, medical office space has turned hot, sparked by greater demand from small doctors’ groups. Jeremy Barbakow, senior vice president at NAI Capital Inc. who specializes in medical space, said since November’s election, small doctors’ groups have opened to signing longer-term leases. Since the beginning of the year, he has brokered more than 35,000 square feet in medical office leases in 20 deals – a typical year’s worth. And more are underway, Barbakow added. For the past three to five years, doctors were reluctant to sign new leases – standard terms are six, seven or 10 years – and instead opted for shorter-term renewals for their typical 1,500 to 4,000 square feet offices. But since the election, the groups have expressed more certainty in their markets and have committed to longer deals – mostly in Encino and Tarzana, Barbakow said. “I used to have to twist their arm to sign a five-year lease, but now it’s not even a fight in signing those five- and 10-year deals,” Barbakow said. In turn, lease rates are increasing. Wilbur Medical Plaza at 5620 Wilbur Ave. in Tarzana is now asking $3.15 a square foot, he said, and landlords are offering fewer free-rent concessions as well. That is significantly higher than the average Valley lease rate of $2.33, according to data from Colliers International (see page 19). Industrial New construction – that’s the story of the industrial market for the North Los Angeles market including Sun Valley, Thousand Oaks, Simi Valley, Moorpark, Valencia and up as far as Tejon Ranch. John DeGrinis, senior executive vice president with Colliers International, said about 1.9 million square feet of new warehouse space is being built in the region. Vacancy is still 2 percent overall – the lowest on record, he added. “The whole story is all the new development coming out of the ground right now,” DeGrinis said. It’s a welcome relief because “we ran out of space years ago,” he added. Space has opened up in the Conejo Valley market, which had almost zero vacancy in last year’s first quarter, and is now at 1.4 percent. DeGrinis attributes that to 2517 to 2551 Azurit Circle in Thousand Oaks, two 20,000-square-foot buildings that came onto the market in the most recent quarter. One building is in escrow, while the other is on the market. They were owned by Aloca Corp., which separated last year from parent company Arconic Inc. “Arconic wouldn’t offer them as divisible (separate deals), and they weren’t fixed up and tenant-ready,” DeGrinis said, “so we didn’t find users jumping up and down, and ready to take them. We have a lot more guys wanting smaller spaces than bigger spaces.” Conejo Valley lease rates jumped to 95 cents a square foot from 79 cents a year ago, due largely to another two buildings that came on the market. The buildings at 1280 and 1290 Rancho Conejo – 34,000 square feet and 29,000 square feet, respectively – are for lease at 98 cents a square foot because the owner will make improvements and possibly remove interior offices. Office deals Over the quarter, two Glendale office buildings – Glendale Center and Glendale Plaza – traded hands in deals worth a combined $260-plus million. That shows investors have noticed Glendale’s newer, upscale retailers and 4,000-plus recent and potential apartments. “Glendale was always the in-between market; it never had established itself between Burbank and Pasadena,” said Senior Vice President Natalie Bazarevitsch with CBRE Group Inc. in Los Angeles. “All of the capital markets – their eyes are starting to look at Glendale.” Vacancy fell substantially over the quarter, she said, and rising lease rates are catching up to Pasadena’s. “There’s no longer a dollar spread (in rent) between the two markets – it’s narrowing,” she explained. Burbank continues to have the strongest lease rates in the Valley region, Bazarevitsch said, and it had lots of first-quarter activity. She gave examples of content producer Hulu’s 21,000-square-foot lease extension at 4000 W. Alameda; Pixelogic Media Partners’ new, 10-year lease for nearly 17,000 square feet at the same address; Critical Content’s new 51,000-square-foot lease at 2300 W. Empire Ave.; and Allianz Life Insurance Co. of North America’s 33,500-square-foot renewal at 2350 Empire Ave. Within the Warner Center in Woodland Hills, a $236 million five-office building portfolio sale’s “solid” price got the year off to a robust start, said Eric Kenas, market research director with Cushman & Wakefield. He noted first-quarter lease activity consisted of mostly smaller deals including Cabeau Inc.’s 11,000-square-foot lease at 21700 Oxnard St., and ICW Group Insurance Cos.’s 13,000-square-foot at 21600 Oxnard St.