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Office vacancy rates still high

New businesses are needed despite positive signs

Posted: August 9, 2013 2:00 a.m.
Updated: August 9, 2013 2:00 a.m.

New leases in the second quarter only put a dent in the SCV office space market. The vacancy rate won't drop much unless more companies relocate to the region.

 

Rapid pre-recession building in the office market, combined with the economic crash, left Santa Clarita with a higher than average vacancy rate for the office rental market, but there was some positive movement.

The second quarter vacancy rate in the office market rose to 20.4 percent, up from 17.1 percent in the prior quarter, said Kevin Fenenbock, senior vice president at Colliers International.

However, that increase was the result of a 102,100 project finishing construction and coming onto the market finally after years of construction and changing hands. It sits at 17901 Soledad Canyon Road.

“The original builder had financial difficulties,” said Ryan House, vice president at Jones Lang LaSalle. “A portion of it is for medical offices, but it might also have some general office space; maybe even some retail.”

But, there was a positive absorption of 10,200 square feet in the office market for the second quarter, Fenenbock said.

Regus USA, global operator of executive suites and office space, is a new tenant from outside the SCV area.

Regus leased 14,400 square feet at the Gateway Plaza in Valencia — in the building formerly occupied by Princess Cruises on Tourney Road.

The North Los Angeles Regional Center also signed a lease for 9,600 square feet at the same building. And engineering firm Hall & Foreman Inc. signed a renewal for 6,900 square feet of space on Springfield Court.

The majority of leases, however, have simply been new tenants moving around from within the SCV market, Fenenbock said.

Locally, Santa Clarita Valley has the third highest vacancy rate among submarkets in the San Fernando Valley and Ventura County office market, he said. In large part, that’s the result of the rapid building that took place about a decade ago.

Also, the majority of new leases signed in the first half of this year have been for small businesses signing leases on space of less than 5,000 square feet. Growth from existing companies has been limited, Fenenbock said.

Vacancy rates won’t decrease significantly without new companies relocating to the SCV from outside the area, he said.

The last large company to relocate to the SCV was Precision Dynamics in the summer of 2012.

The area has a lot of positive things going for it like executive housing, educated workforce, quality of life and a business environment that is very friendly – making it an attractive reason for relocating, Fenenbock said.

And there is a high concentration of professional services, information technology and biotechnology firms in the region.

“It’s a good sign that a company like Regus, an established executive suite operator, finds it important to have a location in the SCV,” Fenenbock said. “It’s a good sign for the valley and the local economy.”

The higher second quarter vacancy rate was primarily attributed to new building on Soledad coming onto the market, which sits 100 percent vacant, he said. And there isn’t going to be any immediate “under-construction product right now,” House said.

“The market is gaining some momentum. I consider it a stabilized market now,” House said. “I see vacancy rate decreasing.’

Asking rental rates have remained in the range of $2.35 per square foot to $2.39 for the first half of 2013, Fenenbock said.

House believes there is the potential for an increase in rental rates in next 12 months. As for the remainder of 2013, Fenenbock expects the current rental rate trend to continue for the remainder of the year.

 

 

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