Glut of Area Office Space Continues; Vacancy Rate 21%
The vacancy rate for office space in the San Fernando and Conejo valleys remained at 21% at the end of the third quarter, unchanged from the second quarter but up from 16% a year ago, the real estate firm of Grubb & Ellis said.
“It is definitely a tenants’ market right now,” said Bruce Kusada, a commercial leasing agent with the Charles Dunn Co. in Encino. “We have a tremendous amount of space.”
The market in the valleys was softer than in West Los Angeles, which had a vacancy rate of 11%, Grubb & Ellis said. The rate was 15% downtown, and 16% for metropolitan Los Angeles as a whole.
The firm’s quarterly survey found 3.3 million square feet of vacant office space in the two valleys, out of a total supply of 15.8 million square feet. In the second quarter, 3.2 million square feet were vacant out of 15.3 million square feet available.
“Overall, the third quarter was a standoff,” said Howe S. Foster, vice president and district manager of the firm’s Sherman Oaks office. “Our marketplace had a lot more space absorbed in the third quarter than the second, but the total inventory took a healthy jump when another 500,000 square feet of new space came on line.”
The survey said that 1.9 million square feet of office space is under construction, only about 300,000 square feet of which has been leased in advance.
In the second quarter, there were also 1.9 million square feet under construction, with 354,000 square feet preleased. In the third quarter of 1985, there were 2.2 million square feet being built, with 409,000 preleased.
The existing backlog and the new construction will probably assure that the valleys remain a tenants’ market for the next 18 months or longer, Kusada said.
Susan Meyer, director of research in the Pacific Southwest region for Grubb & Ellis, said Proposition U, which slashed allowable densities for construction in 85% of the city’s commercial zones, should help reduce the vacancy rate. It should also push development out to the Calabasas-Agoura area from the Encino-Sherman Oaks area, she said.
The Grubb & Ellis survey, which covered 220 multitenant office buildings larger than 20,000 square feet, found that the highest vacancy rate was in the Conejo Valley. The rate there was 25%, versus 20% in the second quarter and 21% in the third quarter of 1985.
The West San Fernando Valley rate was 23%, up from 19% in the second quarter and 16% a year ago. The East Valley rate was 21%, against 28% in the second quarter and 20% a year ago. The Central Valley rate was 18%, unchanged from the second quarter, but up from 11% a year ago.
SAN FERNANDO VALLEY OFFICE SPACE
Vacancy Area Total Space Vacant Rate Burbank, Studio City, 3,993,000 858,000 21% Universal City, North Hollywood Encino, Van Nuys, Sherman Oaks 5,446,000 962,000 18% Woodland Hills, Calabasas, 4,793,000 1,092,000 23% Tarzana, Canoga Park Thousand Oaks, Agoura, 1,591,000 404,000 25% Westlake Village Total 15,824,000 3,317,000 21%
Source: Grubb & Ellis
