Major Warner Center Complex Planned
Lennar Partners is set to break ground in December on a 1.2-million-square-foot office complex at Warner Center, the first major speculative project to be built in Woodland Hills since the last recession.
The development at the northeast corner of Canoga Avenue and Burbank Boulevard will be called LNR Warner Center and will include eight five-story office buildings, a hotel, a fitness center, several restaurants and a day-care center. The $70-million first phase, slated for completion in the fall of 2000, will include two office buildings totaling 356,000 square feet.
The project will be owned by Irvine-based Lennar, with Woodland Hills-based Voit Development Cos. acting as the developer. Developer Robert Voit built most of Warner Center, including the last big high-rise project, Warner Center Plaza III, a 25-story office tower that opened in 1991. Lennar Partners is a subsidiary of Miami-based LNR Property Corp.
The Lennar development is being driven by demand for more space in a market with low vacancy, according to John Sabourin, a Lee & Associates broker who is marketing space in the development.
The vacancy rate for both direct and sublease space in Warner Center was 7.6% at the end of the third quarter, according to Cushman & Wakefield. The research firm CoStar Group Inc. lists the vacancy rate at 5.3%.
Sabourin and others said vacancies in the area have fallen steadily during the current real estate recovery because of continued demand from insurance and technology firms, drug companies and others looking for room to grow.
“We are at historic lows [in vacancy rates], with little or no new construction recently. I think Lennar will be in an extremely good position with this new product,” said broker Ron Wade of Cushman & Wakefield.
New office buildings and renovated space have been developed in other portions of the San Fernando Valley, Wade pointed out, but this is the first office construction in Warner Center in some time. Wade said two projects being developed farther out in the West Valley at a former Hughes defense property in West Hills--one by Trammel Crow and the other by Regent Properties--will each add more than 500,000 square feet of office space to the West Valley market.
But much of the space in the Regent project has already been leased, and Wade said both developments will likely find plenty of tenants looking for big blocks of space for claims processing, loan processing, customer service phone centers and other “back office” uses.
“In general, tenants wanting large, campus-style environments are looking farther out [from Los Angeles], but there is still strong demand for people who want the kind of premium space you find in Warner Center,” Wade said.
Much of Warner Center was built during the last commercial real estate construction cycle, in the mid-1980s to the early 1990s. That included the 25-story, 585,000-square-foot Warner Center Plaza III, which sat empty for about five years but is now about 92% leased, said Don Hudson, the building’s leasing director.
Hudson said that although Lennar’s project will compete with his building, the new space is needed in the market. Warner Center Plaza III has only about 48,000 square feet available, mainly in spaces of a few thousand square feet.
Hudson said his building and Lennar’s project will both face competition from some large new and renovated office buildings farther out in the Valley, but only to some extent.
“This market is stratified. Some tenants are going to want the class-A high-rise you find in Warner Center, or the kind of product Lennar is offering, but others are more like back office users whose main concern is price,” Hudson said.
One reason for the growth of Warner Center has been its popularity with a number of large insurance and health-care firms. One of these, Health Net, occupies more than 300,000 square feet and employs more than 2,000 workers in Warner Center.
Health Net last week named Cushman & Wakefield to represent it in its effort to find a new corporate headquarters facility.
Health Net might stay put, but it is also looking from the West San Fernando Valley to Pasadena and north to Santa Clarita, according to a Cushman & Wakefield announcement.
The Lennar project is being designed by Poliquin Kellogg Design Group of Warner Center and built by Snyder Langston Construction Services of Irvine.
No schedule has been set yet for construction of the second and third phases, Sabourin said. He noted the building site includes two existing buildings that will be razed as part of the later construction phases.
Sabourin said asking rates for the Lennar buildings will be about $2.30 per square foot per month, well within the range of current rents in the market. Average asking rents in the Warner Center market were $2.20 per square foot per month during the third quarter, according to Cushman & Wakefield.
