Ventura Blvd.’s Vacancy Rate Rises Sharply : Commercial real estate: A developer says the glut is the worst in 30 years; unused retail space has doubled in a year. That can be great news for would-be tenants.

Ventura Boulevard. Renowned for its endless miles of side-by-side stores, office buildings, restaurants--and empty space.

That’s right, empty space. The recession has left a glut of vacant commercial properties on the boisterous street, and anyone driving down the boulevard can see that it’s a rare office building that doesn’t have a “For Lease” sign in front.

As for retail space, the boulevard’s vacancy rate has doubled to 15% in just the past year, according to the broker CB Commercial Real Estate Group Inc. in Sherman Oaks. Michael Lushing, one of CB Commercial’s agents, estimates that there’s 1 million square feet of empty retail space along Ventura from Laurel Canyon Boulevard to Topanga Canyon Boulevard.

“There’s a ton of space out there,” Lushing said.

Herbert M. Piken, president of the Piken Co., a Studio City-based developer and property owner that has built several shopping centers along Ventura Boulevard, said the glut is the worst he can remember in his 30 years in the business.

“New construction has come to a halt,” he also said. “Anybody trying to develop on Ventura Boulevard today should also see a psychiatrist.” Besides, he added, banks have virtually stopped lending for new commercial construction on the boulevard and throughout much of Southern California.

Adding to the problem are unique situations such as the collapse of Independence Bank in Encino. Once the San Fernando Valley’s largest commercial bank, Independence was shut down by federal regulators in January because it was insolvent. Now its former high-rise headquarters building on Ventura Boulevard sports a “For Lease” sign.

All of which is bad news for developers and property owners, but great news for would-be tenants. Because of the glut, rents for retail space on the boulevard have tumbled by roughly one-third from four years ago, to $1.50 to $1.85 per square foot, from $1.85 to $2.40, said Richard Abbitt, senior vice president of Beitler Commercial Realty Services in Sherman Oaks.

Moreover, some property owners are offering free rent--say, for the first six months on a five-year lease--to attract tenants. Others are offering half-rent for the first year because, in offering free rent in the past, some struggling stores have abandoned their buildings after just the first six months, leaving the landlords without any cash flow, said Jeff Brain, president of a Sherman Oaks brokerage that bears his name.

Landlords are also slashing rents for present tenants “rather than risk having them leave,” Abbitt said.

But even those enticements haven’t been enough to generate a significant increase in retail leasing on the boulevard, which runs from Studio City to Woodland Hills. Retailers, whether they be mom-and-pop entrepreneurs or major chains, are hesitant to sign new leases on the street until they get a clear signal as to when the weak economy is going to improve.

“When people are in uncertain economic times, they’re reluctant to make long-term decisions,” said another CB Commercial agent, Nancy Stark. “Many tenants are taking a wait-and-see approach.”

Indeed, the recession is the main reason Ventura Boulevard is laden with empty commercial space, a problem that has also contributed to high vacancy rates (and problem loans for lenders) throughout much of Southern California and the nation.

But some of Ventura Boulevard’s own characteristics have exacerbated the problem there.

With consumer spending so sluggish, restaurants and other retailers on the crowded boulevard are having problems standing out and generating enough sales to weather the economic storm. Also, the empty spaces in office buildings mean that there are fewer people during the workweek to support those stores.

“Ventura Boulevard also typically has higher prices, so when the economy goes into trouble, the guy paying $1 a square foot on Van Nuys Boulevard can survive longer than the guy paying $2.50 on Ventura Boulevard,” Brain said.

Ventura Boulevard is “one of the hardest-hit areas in the San Fernando Valley” in terms of retail vacancies because the street “has become saturated with boutiques and restaurants unable to draw sufficient volume,” CB Commercial says in a new report on the region.

New building rules to control the street’s growth also play a role, brokers said. The rules, among other things, require that fees be paid to the city when there’s a “change in use”--for example, if a building that formerly housed a store now becomes a restaurant, Brain said. The question becomes whether the landlord or tenant will pay the fees.

“On a couple of our properties, we’ve lost deals because the fees are a new item to be negotiated in the lease,” Brain said.

Not everyone is bearish, however. Jim Crocenzi, a Jarvis & Associates agent who’s trying to lease space in two Ventura Boulevard retail centers--the Center at Coldwater in Studio City and the Courtyard Shops of Encino--said “the amount of interest” by potential tenants “seems to be picking up.”

He noted that a Sports Connection outlet is moving into the Courtyard Shops and that Ron Ross, an upscale apparel retailer, is scheduled to move into the Center at Coldwater from its Tarzana location on March 15. Those arrivals should attract other tenants to the buildings, he said.

But in the case of the Center at Coldwater, the real estate industry will be watching closely to see how quickly the center fills up. That’s because up to now, the building--completed two years ago by the Piken Co. as a tony reminder of Rodeo Drive but hounded by protests from homeowners groups--has been troubled by cost overruns and noticeably absent of tenants.

Because of the extra costs, Piken was forced to strike a new deal with Security Pacific National Bank by which, among other things, the bank took control of the center in 1989.

In preparation for Ron Ross’ arrival, part of the new building is being redesigned for the retailer, with the cost being split between Ross and the bank, Security Pacific Vice President Doane Liu said.

He declined to say how much is being spent but downplayed the changes being made for Ross, saying they are “not unlike any other anchor tenant lease transaction even in a good economy. Other than that, it’s not our policy to reveal the details.”

Other landlords, meanwhile, are rewriting the traditional five-year commercial lease to survive the present economy.

Some are writing only three-year leases. Others are insisting that, if their present leases give their tenants the option to extend the leases after so many years, the landlords get to raise the rent to whatever the market will bear, Brain said.

“The landlords are saying, ‘OK, the next five years we’ll live with lower rents, but at the end of five years, we’ll adjust the rent to whatever the market is at that point,’ ” Brain said.