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San Fernando
Monday, Jul 15, 2024

Sales Star in Slow Quarter

Sometimes the numbers just aren’t that helpful. Consider what they say about the industrial market in the San Fernando and surrounding valleys during the third quarter. The vacancy rate was up since the prior quarter, even though the market saw more sales and lease activity, and landlords raised rents. How to make sense out of that? Now try this. In July, Mission Oaks Corporate Center in Camarillo was sold to Rexford Industrial LLC of Los Angeles for $59.1 million. It was the largest sales transaction of industrial property in Ventura County since 2007. To broker Patrick DuRoss, associate vice president at Colliers International’s Encino office, it can only mean one thing. “We have local investors who believe in the area,” he said. And outside ones too. Also in the quarter, there was the $13.1 million sale of a 144,800 square foot property at 3990 Heritage Oak Ct. in Simi Valley. It went to Boston investment company Cabot Properties Inc. Clearly, investors are taking advantage of low interest rates when they can get them, but, alas, strong investments sales don’t fill space. So despite that, the vacancy rate climbed three-tenths of a percent in the third quarter, to 5 percent. Still, there were rumblings of activity in the valleys, as sales and leasing rose about 15 percent to 1.5 million square feet. That helped push asking rents up one cent to 55 cents a square foot, according to data from Jones Lang LaSalle Inc. But brokers say that on the ground, asking rents were all over the place. “If you look at a new property in the Central San Fernando Valley, asking rates could go up to 75 cents per square foot net,” said DuRoss. “But if you go out to other areas, you’d be looking at 59 cents asking net.” Most brokers say local manufacturing companies are being very particular in looking for spaces that suit their distribution needs. They can afford to be, so they are often taking their time. “In the Valley there are some older manufacturing properties with lower ceilings, some older product that is not going to be snapped up,” said Nigel Stout, executive vice president at Jones Lang LaSalle in Valencia. Still, it could be worse. The area vacancy rate was still a tenth of a point lower than the Los Angeles County average. “Our vacancy rate as compared to the rest of the world still isn’t that bad,” noted DuRoss. Slow going The Central Valley, with its close freeways, remains desirable. A 49,700 square foot property in the Airport Business Park in Van Nuys, was leased to storage company 1-800-Pack-Rat, LLC. Financial terms of the deal were not disclosed. However, DuRoss said the property had the advantages of being in a new development, with high ceilings. That meant, of course, that a higher rent could be demanded. However, with little to no construction in recent years amid the recession, most companies are being forced to choose between newer properties in more far-flung regions and older, more centrally located spaces. And despite building sales that marked the quarter, the Conejo Valley and western Ventura Country were not exactly hopping with action in a slow economy. “People are asking themselves ‘Do I stay where I’m used to and where my workforce is based? Or do I make a tertiary move that might lengthen my commute and I might lose a few key employees?’” said DuRoss. “And for a lot of them, in this economy, they’ve been able to get better lease rates and stay put.” The only major development on the horizon is another 230,000 square feet that will enter the market next quarter when Indianapolis-based Scannell Properties, which specializes in build-to-suit properties, completes new buildings in Pacoima. For now, that slow development is good, brokers say, but Stout said he has seen increasing activity in small spaces and timid signs of new developer interest on the horizon. “Santa Clarita has typically been a release valve for industrial demands in the Valley,” he said. “I’ve seen a few build-to-suit sites, which we call the canary in the coal mine for new construction.” These properties may be baby steps, but the overall trend toward growth is encouraging. “There is a slow demand in general, but it is positive,” he said.

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