‘Good Deals’ Help Absorb Office Space : Leasing: Despite slump, vacancies decline in some suburban areas where a lot of new buildings are not coming on line.
Occupancy rates for office space is several Los Angeles-area communities have actually improved over the last quarter--despite what’s been perceived as a serious real estate slump.
The numbers don’t reflect spectacular gains or a boom of any sort, but they do suggest that the leasing market may not be so bad after all.
In the San Fernando Valley, for example, the vacancy rate for office space dipped from 15% in the first quarter of this year to 14% in the second quarter.
This decrease, according to figures compiled by Grubb & Ellis Commercial Real Estate Services, was accompanied by a healthy increase in what’s known as net absorption, defined as office space occupied, less any space vacated in a particular building or area.
In addition to 649,104 square feet of space absorbed in the Valley this most recent quarter, another 238,000 square feet of space was preleased in buildings under construction. The West Valley generally, and Warner Gateway II, specifically, accounted for a large share of the Valley’s improved leasing picture.
Vacancies in the Inland Empire are still uncomfortably high for most commercial property owners. The area did register a drop in office vacancy rates between the first and second quarter of 1990 from 26% to 24%, reported Grubb & Ellis. Absorption for the second quarter of this year totaled 420,576 square feet, compared to 247,160 for the same period last year.
The South Bay, which has been suffering for several years due to aerospace cutbacks, posted a disappointing decrease in net absorption. But the vacancy rate dipped from 17.4% in the first quarter to 17.1% in the second quarter. Twelve months ago, the South Bay office market suffered from a 21.4% vacancy rate, recounted Grubb & Ellis.
What accounts for many of these decreased vacancy rates is a combination of favorable deals being offered by landlords and a slowdown in the amount of new space being built. Areas where construction is still going strong may expect supply to continue overshadowing demand.
One example of this is the Ventura County office market, which posted a decrease in absorption and an increase in the vacancy rate over the second quarter of 1990. Net absorption for the quarter totaled 26,665 square feet, compared to new projects totaling 302,477 square feet in the Conejo Valley alone and another 187,284 in the Coastal Plain area of Ventura County.
Finally, in downtown Los Angeles, office vacancy rates decreased to a 12-month low of 13.7%. This number is expected to increase markedly, however, as a result of 2.6 million square feet of new space scheduled to come on line over the next six months, plus 2.1 million square feet more in 1991.
DEVELOPMENT
1st Phase Completed on Industrial Center Overton, Moore & Associates recently completed the first phase of its $40 million, 48-acre West Corona Industrial Center. Two buildings totaling 240,000 square feet form the first phase of this project which is just north of the 91 Freeway and east of the Orange County line.
The Colonnade, a $30-million business park in Santa Fe Springs, is under construction by a joint venture of Trammell Crow Co. and Copley Real Estate Advisors of Boston. Seven buildings totaling 241,500 square feet are being built on 14 acres at Norwalk Boulevard and McCann Drive. Eventually, the development is planned to total 50 acres.
Tyler Mall in Riverside is undergoing an expansion that will eventually double its size to about 1.6 million square feet. A second floor is being added, along with three anchor tenants. The first phase of this makeover will cost owner Cigna Investments Inc. $48 million and be completed in October 1991. Another two phases of construction work at the 20-year-old mall are planned thereafter.
The Westin South Coast Plaza in Costa Mesa has undergone a $10.5-million face lift. Improvement work on the 15-year-old hotel began in May, 1989. It is owned by C.J. Segerstrom & Sons and is operated by Westin Hotels & Resorts, a subsidiary of the Aoki Corp.
The Barker-Patrinely Group of San Francisco is planning to start work this winter on a major overhaul of the Miracle Mile-adjacent Carnation Co. headquarters. Carnation sold its headquarters building and adjacent land as part of a move to Glendale. The nine-story, 179,000-square-foot building will get a new interior and exterior and be renamed The 5055 Wilshire Building. The new owners report that the cost of acquiring and upgrading the property will total about $50 million. Leasing will be handled by Grubb & Ellis Commercial Real Estate Services and occupancy is scheduled for the winter of 1991.
Palmdale’s new 102-acre Antelope Valley Mall is ready to open next month, anchored by Sears, Roebuck & Co.; J.C. Penney Co.; Gottschalks; and Harris Co. When completed, the $75-million mall will total 750,000 square feet. The project is being built by a subsidiary of Cleveland-based Forest City Enterprises Inc., George D. Zamias Developer and JCP Realty Inc.
Next door, a new 550,000-square-foot open-air shopping center is being planned by Dean Witter Realty of New York in a joint venture with Watt Commercial Development Co. of Santa Monica. The Marketplace at Palmdale is to be built on 50 acres fronting 10th Street West.
Santa Margarita Co. has entered into a joint venture with the Koll Co. to develop an $18-million retail center at Santa Margarita Center, a 700-acre community which combines the 450-acre Ranch Santa Margarita Business Park and the 250-acre Town Center.
The area’s newest retail component will total 160,000 square feet on 15 acres near the intersection of Antonio Parkway and Coto de Caza Drive.
The center is planned to eventually offer 10 million square feet of commercial space, along with a park, school and dense housing.
Ahmanson Commercial Development Co. has completed the first half of its 18-acre Calabasas Commerce Center. Phase 1 includes two office buildings and two research and development facilities totaling 123,731 square feet and valued at $13.5 million. Another four buildings are planned to add 226,269 square feet.
A facility for Armenian senior citizens is being built on a 10.6-acre hilltop site in the Mission Hills area of Los Angeles overlooking the San Fernando Valley. The New Ararat Home of Los Angeles will open next summer with room for 130 residents, a chapel and community center. This first phase of development will cost $12 million. Ultimately, sponsors hope to provide board, care and hospital facilities for 600 elderly Armenians.
The current Ararat Home is on West 37th Street in Los Angeles. Ararat Convalescent Hospital is located in Eagle Rock.
The Grove in Northridge--formerly known as Walnut Grove Shopping Center--is near the end of a $10-million expansion and renovation. The 138,000-square-foot center is located at the northeast corner of Tampa Avenue and Nordhoff Street; it is 96% leased. Walnut Grove Associates Ltd. of Farmington, Conn. is the owner.
SALES
Altair Purchases 3 Buildings in Ontario Altair Investment Co. of Santa Monica has purchased three industrial buildings in Ontario’s Vintage Industrial Park for $14.9 million. The 481,800-square-foot, 22-acre project, known as the Sterling Series, was sold by U.P. Realty of Ontario, a subsidiary of Union Pacific.
Also as part of this purchase, Altair acquired an adjacent 15-acre industrial site. When completed, the Sterling Series will total about 800,000 square feet of commercial development space. Grubb & Ellis represented the buyer while Coldwell Banker represented the seller.
Vineyard Plaza in Oxnard was sold recently by Crossroads Development Corp. to San Fernando Valley investors Anthony and Shanny Sinskey for $12.5 million.
The 68,000-square-foot retail center is located on 5.5 acres at the northwest corner of Oxnard Boulevard and Vineyard Avenue; it is 85% leased. Grubb & Ellis represented the buyers, while Coldwell Banker represented Crossroads.
Warner Corporate Center at 21300 Victory Blvd. in Woodland Hills has been sold for $76 million to Nomura Warner Center Associates, a partnership headed by Nomura Real Estate International Inc. The 250,000-square-foot building was sold by an affiliate of LAMCO, Long Assets Management Co.
The Koll Co. of Newport Beach and Mission Land Co. of Brea recently bought 63 acres at Arrow Highway and Live Oak Avenue in Irwindale for $19 million. The companies are developing Koll Business Center Irwindale, a business park that is planned to eventually include 1.1 million square feet of commercial space.
Seller United Concrete Pipe represented itself in the recent transaction and the buyers were represented by Coldwell Banker Commercial. Mission Land is a subsidiary of SCEcorp., the parent of Southern California Edison Co.
LEASES
New Leases Signed in Warner Center Plaza The Voit Cos. announced $26.3 million in new leases at Warner Center Plaza in Woodland Hills. Answer Systems Inc., a subsidiary of Sterling Software committed to a $6.85 million lease for 39,400 square feet.
California Compensation Insurance is leasing 21,500 square feet in a deal worth $2.65 million. Other new and renewed tenants include DaVinci Dental, Fireman’s Fund Insurance Co., Manufacturers Life Insurance Co., Health Net, Equitable Life Assurance Society of the U.S. and Chrysler Credit Corp.
Interactive Systems Corp. has signed a 10-year, 65,000-square-foot lease valued at more than $20 million at the Northpoint office building at Howard Hughes Center in West Los Angeles.
The Kodak Co. subsidiary will move from Colorado Place in Santa Monica to anchor the nine-story, 100-square-foot office tower set for completion in December 1991. Tooley & Co. represented Howard Hughes Properties in the lease transactions; Bailes & Associates Inc. represented the tenant.
At Corporate Center in Calabasas, Interactive also signed a lease for 15,000 square feet of office space from The Johnston Group.
Construction will begin at Watson Industrial Center South in September on a 135,000-square-foot expansion of K mart Apparel Corp.’s existing 465,000-square-foot industrial facility. K mart has signed a 15-year, $10 million lease for the new space, set for completion in the first quarter of 1991. Watson Land Co. of Carson is the owner/developer.
Downtown L.A.’s $350-million Gas Company Tower was “topped out” this month as workers completed steel framing on the 52-story office project. Southern California Gas Co. has preleased 522,000 square feet in the 1.26-million-square-foot project by developer Maguire Thomas Partners. Located at 5th Street and Grand Avenue, Gas Company Center is set for occupancy in the summer of 1991. Other major tenants include law firms Jones, Day, Reavis & Pogue and Morrison & Foerster.
In Century City, JMB/Urban Development Co. opened its $250-million 1999 Avenue of the Stars office building. The 39-story tower is about 45% leased and tenants have started moving in.
First Los Angeles Bank--which previously signed a 33,000-square-foot lease for $17 million--has subleased part of its space to another tenant. The bank is still looking to sublease another 14,089 square feet of space in the 774,000-square-foot building.
Westwood Gateway leasing brokers report $19 million in new leases and $11.3 million in renewals in the three-building office cluster at Santa Monica and Sepulveda boulevards in West Los Angeles. Recent tenants include Brentwood Associates, Young & Rubicam, Foothill Capital Corp., Westfield Inc., CBS Records Inc. and Jefferies & Co.
No, leasing is not dead in downtown Los Angeles. The law firm Fulbright & Jaworski has signed a $20-million lease for 40,000 square feet at Manulife Real Estate’s 865 South Figueroa. The 15-year lease is for the newly opened tower’s 28th and 29th floors. Brokerage Julien J. Studley represented the tenant while Manulife was represented by Cushman Realty.
Another law firm signing for downtown office space was Hancock, Rothert & Bunshoft of San Francisco. The firm has signed a $5.3-million lease for 20,209 square feet of office space at 515 South Figueroa St. Charles Dunn Co. and Coldwell Banker Commercial Real Estate Services represented the tenant. The Manufacturers Life Insurance Co. of Toronto, the lessor, represented itself.
