Conejo Office Vacancy Gap May Take Some Time to Fill

Conejo Office Vacancy Gap May Take Some Time to Fill Real Estate by Shelly Garcia The other day, a Web site I frequently visit called multexinvestor.com published yet another story about the elusive economic recovery. The author, a financial analyst named Rick Wayman, wrote, “Forget about a V- or U-shaped recovery; instead, think Grand Canyon.” His theory was that things will get better, but not before we climb up and down a lot of rocks. That is exactly what we’re seeing in the local real estate community, even if most brokers are reluctant to take that point of view. What they’ll tell you is, they are starting to see “activity.” What they mean is there are some clients actually taking their phone calls. Prognostications, after all, are in the eye of the beholder, which brings me to the outlook for Conejo Valley. One of the most vibrant office leasing markets over the past two or three years, the Conejo Valley had a vacancy rate of about 14.5 percent as of the first quarter of the year. (Things may have gotten a little worse since then, but the second quarter data is not yet in.) For the sake of comparison, vacancies were about half that a year ago. The Conejo market was so strong, developers were encouraged to construct about 900,000 square feet of new office space in 2001 and, in fact, Conejo Valley absorbed 428,000 square feet during that year, according to figures compiled by Daum Commercial Real Estate Services. But any enthusiasm developers may have had for the Conejo Valley office market was quashed in the first quarter when net absorption went into negative territory to the tune of 25,000 square feet. Chad Jacobson, Daum’s vice president for research and marketing services, said it will take all of 2001 to absorb the space constructed last year. That sounded a little optimistic to me, so I asked for a second opinion. “We’re not going to see single-digit vacancy numbers until the end of 2003,” said Tom Dwyer, a broker with CB Richard Ellis. Dwyer says he tracks tenants seeking space in the Conejo Valley pretty closely. By his count, there are currently 52 tenants looking for space of 5,000 square feet and more, or about 1 million square feet of demand. But many of those tenants already occupy offices in the Conejo Valley and they would be trading one space for another. “That only gives us 600,000 square feet of net absorption if all 52 tenants sign today,” said Dwyer. “It still doesn’t carry all the empty space.” I went back to Jacobson, who, it turns out, really meant to say the space won’t be leased up this year, an idea that got oversimplified in the translation by the PR guy writing the press release. “It’s going to take at least through the end of 2002,” Jacobson clarified. “It will probably lead into 2003, first or second quarter, before all that space is absorbed.” That still left me with a prognostication gap of about six months, so I consulted a third source. “As the economy tends to pick up, we’re going to see activity that we can’t anticipate now,” said Tom Festa, a Grubb & Ellis broker who does a lot of work in Conejo and thought I was being negative. “You don’t need that many transactions to get the space leased.” So who’s right? It seems to me that the ones with the right idea are the developers and landlords, who in Conejo, as in other parts of the San Fernando Valley, have resisted giving away the store because business slowed down (or dried up, depending on how you look at it). I’m told that even in Conejo, a newer, more prestigious market than many in the rest of the Valley, there are concessions to be had – a few months of free rent or a company name on the building, even for smaller tenants. No one knows better than the developers and landlords how scarce tenants are in the current market. They also know, this too will change, but they are not counting the days until it does. They’re just climbing over the rocks, one at a time. Studio City Center Sold A private investment group has acquired Studio City Place, a shopping center at 11239 Ventura Blvd. The 108,110-square-foot center sold for more than $21 million. The seller, Studio City Associates LLC, has owned the complex since 1993. They were represented in the sale by David J. Ickovics and Stacy Vierheilig-Fraser, brokers with Charles Dunn Co. Inc. Dunn’s Hamid Soroudi represented the buyer, 11239 Ventura LLC. Allstate Moves In Allstate Insurance Co. inked a deal for 30,000 square feet of office space at Warner Center Corporate Park, a CarrAmerica Realty Corp. property at DeSoto Avenue and Burbank Boulevard. The value of the lease transaction was not disclosed. Dean Chandler, Jeff Morgan, David DeFore and Jack Weber of CB Richard Ellis represented Allstate. CarrAmerica senior vice president Andy Fishburn represented the landlord. Conejo Condo Deal A suite of office condominiums in Thousand Oaks was sold to Boardwalk Investments LLC in two transactions totaling $1,893,525. Boardwalk Investments, a property management company that does business as The Emmons Co., will occupy about half of the 10,000-square-foot property. The sellers will occupy the remaining space. Alexander, Clayton, Marrow and Wilson, a law firm, which had owned the majority of the property, will remain as tenants in about 4,000 square feet of space. Michael Slater and Tom Dwyer, brokers with CB Richard Ellis, represented Boardwalk Investments. Senior reporter Shelly Garcia can be reached at (818) 676-1750, ext. 14 or by e-mail at [email protected].