Commercial Space in Relatively Short Supply in County
In contrast to the white-hot pace of home sales, Ventura County’s commercial real estate market ended 2002 with a slight increase in vacancy rates.
Though the amount of retail space available for rent or purchase locally increased by two percentage points to 9.5% in the fourth quarter and office space crept up nearly a point to 14.5%, the situation is still much better than elsewhere in the nation.
“Once you see these [national] numbers, you are going to be very thankful you live in Ventura County ... things can get worse,” said Lewis Horne, keynote speaker at a commercial real estate symposium staged by his employer, CB Richard Ellis, in Oxnard on Friday.
Horne, the real estate company’s executive managing director for the Greater Los Angeles region, said the commercial market in Ventura County is much stronger than in other metro areas, citing San Jose, with a 22.9% vacancy rate, Dallas at 22.9% and Atlanta at 21.1%.
Ventura County’s vacancy level beat the national rate of 16.1% in 2002 and California’s 16.2%, although it lagged behind top markets, such as Washington, D.C., at 8.9%, Sacramento at 9.9% and New York’s Long Island and Manhattan, at 10% and 10.6%, respectively.
Horne said that more businesses are deciding to buy rather than lease their buildings, choosing to spend more in the short term while looking to save in the long run, or else realize a profit when the property is sold.
“Even though the expense is higher to purchase, we see a tremendous appetite to buy,” Horne said. “It is a tremendous time to be a seller.”
This even applies to the industrial sector, which in Ventura County had vacancies of 8.2% in the last three months of 2002, virtually unchanged from the same period in 2001.
Senior Vice President Paul Farry, an industrial property specialist in the Ventura office of CB Richard Ellis, told the audience there was a “disconnect” in the relationship between sales and leases last year, with purchase prices going up but rental rates dropping. He predicts that a continued slow pace of building this year will mean fewer vacancies; lease rates and property investment will be flat but land prices will continue to rise.
Among large office space deals in 2002, pharmaceutical firm Baxter spent $80 million for the former regional headquarters of Verizon in Westlake and Countrywide Home Loans picked up a Thousand Oaks building, erected in 1983 as headquarters of Exxon Corp.’s domestic oil and gas unit, for $29 million.
In all, nearly $300 million was invested in office space from Calabasas to Ventura last year, said Tom Dwyer, first vice president for CB Richard Ellis. He predicts office availability will drop in 2003 because of reduced construction and more local business expansion. He also forecast increased investment in so-called “Class B” office space -- older buildings or those in less-desirable locations whose rental rates are usually about 15% below premium office complexes.
David L. Rush, first vice president for retail properties, said several retailers shifting to newer buildings helped push up vacancies last year.
In Ventura, for example, Barnes & Noble left a building at a Telephone Road shopping center and moved to larger digs up the street at Ventura Gateway Plaza. And a Ralphs grocery story that moved from one side of Victoria Avenue to the other to join the Montalvo Square development hurt foot traffic for smaller tenants at its former location.
Still, Rush maintains that these proven locations “create an opportunity for those who can be creative with second-generation retail space.”
Mark Schniepp, director of California Economic Forecast in Santa Barbara, said he believes the county’s commercial real estate market is healthy. Although the industrial sector needs inventory, retail is stable, and offices “are a little overbuilt at the moment, but nothing serious.”
Despite a growing housing crisis -- December’s $348,000 median home cost is pricing more people out of the market -- Schniepp said Ventura County employers should add jobs this year, which will translate into “decent consumer spending.” He expects a steady absorption of the commercial real estate currently available.
