Low Job Creation Means Slow Leasing During Final Quarter

The Conejo Valley lease market made small gains while the sales market took some giant leaps forward during the final quarter of last year. Class A office vacancy fell nearly half a point to 17.8 percent, according to the Los Angeles office of Colliers International. The market absorbed 23,900 square feet. Asking rents grew 2 cents to $2.15 a square foot. Brian Hennessey, senior vice president at Collier’s Encino office, said demand for office space depends on job creation, and right now both employment growth and office absorption in the Conejo and Simi markets are in slow-growth mode. “A lot of the market is musical chairs,” he said. “The tenants are coming out of one building and going into another. It doesn’t move the needle unless they take a little more space in the process.” However, the Conejo Valley generated plenty of interest among investors during the quarter, said Lee Black, principal at Cassidy Turley. With interest rates still favorable, that was similar to other Valley-area submarkets. “The end of 2013 saw institutional investors reach out to the suburban landscape, chasing yields that they couldn’t find in other parts of Los Angeles,” Black said. “Weak fundamentals and an influx of out-of-state and foreign investors fighting over the same limited opportunities in the core markets of Los Angeles made the Conejo Valley last year an obvious choice.” One big deal, which was being negotiated in the fourth quarter and just closed this month, was the Westlake Park Place in Westlake Village. The five-building, 239,000-square-foot campus on Townsgate Road sold for an estimated $100 million, according to Black. Kevin Shannon, vice chairman at the El Segundo office of CBRE Inc. and lead broker on the deal, called the property “the premiere office park in the Ventura and Conejo Valleys” and said that the sale could point to better times for the market. “Structured rent increases and forecasted market rent growth appealed to investors and resulted in tremendous activity during the marketing process,” he said in a statement. “There is no comparable alternative in the market for tenants, which made this an attractive opportunity for capital.” That deal followed an even larger one in November when Bank of America unloaded a portfolio of 10 properties with nearly 1.8 million square feet for $200 million. Seven of the buildings are in the Conejo market, including three in Simi Valley totaling 770,000 square feet, two in Agoura with 158,000 square feet, one in Westlake Village at 254, 000 square feet and one in Thousand Oaks with 157,000 square feet. The 233,000-square-foot 4500 Park Granada building in nearby Calabasas was also part of the sale. The buyer of the portfolio was Rising Realty Partners, a downtown Los Angeles landlord founded by Nelson Rising, former chief executive of the defunct MPG Office Trust Inc. In the industrial market, vacancy fell to a mere 1.6 percent in the quarter, compared to 2.5 percent the previous quarter. It is the tightest sub-market in the greater Valley region, with asking rates at 73 cents a square foot, the second-highest. Grant Fulkerson, a principal at Lee & Associates in Calabasas, said options are few for companies seeking biotech lab or manufacturing space. The problem is complicated by the fact that many tenants want newer space, not older buildings that constitute much of the available stock. The market has reached the point where developers are looking to build light industrial on spec because of strong demand. – Joel Russell -Main Events In November, Rising Realty Properties purchased a portfolio of 10 buildings with 1.8 million square feet from Bank of America for approximately $200 million. The buildings were formerly offices of Countrywide Financial. About 1.4 million square feet are in the Conejo and Simi valleys. A 21,000-square-foot office building in Westlake Village sold for $1.25 million in November. The Corsa Building at 5707 Corsa Ave. was bought by Surfside Snyder Family Trust of Malibu from a private owner. The two-story building was constructed in 1981 and is fully leased. Smart & Final Center in Simi Valley sold for nearly $17 million in November. The 99,660-square-foot retail center at 1788-1856 Erringer Road was purchased by Milan Capital Management of Anaheim from Sv Marketplace, also of Anaheim. The center was built in 1965 on 6.8 acres and is anchored by a 20,000-square-foot Smart & Final Inc. outlet. In December ZPower LLC renewed its 43,000-square-foot lease in Camarillo. The building at 4765 Calle Quetzal is fully leased to ZPower, a battery manufacturer. The two-story Class B office building was constructed in 1986 and serves as corporate headquarters as well as the firm’s research and development facility. The 74,000-square-foot Camarillo Plaza shopping center was bought for $17.8 million by David Pick Investment Group of Beverly Hills after previous owner, Camarillo Plaza LLC of Los Angeles, filed for bankruptcy. The center, built in 2002, is more than 80 percent leased. Tenants include popular chains such as Baja Fresh and The Habit Burger Grill. Conejo Valley Office Market At a Glance Inventory: 6.81 million square feet Under Construction: 0 Class A Asking Rents: $2.15