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Real Estate Market Outlook: Office Space

Posted: July 2, 2014 6:34 p.m.
Updated: July 2, 2014 6:34 p.m.

Ryan House, vice president with Jones Lang LaSalle. SCVBJ archive photo

 

The inventory of available office space in the Santa Clarita Valley has shrunk dramatically within the last three years, according to Ryan House, vice president with Jones Lang LaSalle.

“We were upwards of 25 percent vacancy three years ago and today we’re down to 12 percent in the core Valencia market,” House said.

While the official first quarter vacancy rate for office space in the valley was 15.5 percent, one vacant building alone accounts for 3 percent of that rate. The construction a few years ago of a building on Soledad Canyon Road, between Sierra Highway and Sand Canyon and originally intended for medical use, remains vacant and represents 3 percent of the market, according to House.

“The market has been pretty static because there hasn’t been any building for the last few years,” he said. “Our available inventory has basically been cut in half over the past three years.”

As vacancy rates have lowered, asking rates are inching up. And at the same time concessions and perks once offered by landlords aren’t quite as grand as they were during the recession. Still, while the market is improving landlords still want to gain positive absorption and will work to win a tenant. Concessions, however, will continue to dwindle as vacancy dips below 12 percent, House said.

Pegging the market’s recovery at a rate ranging between 10 to 12 percent, House said the demand for office space in the market is still moderate. There isn’t yet a huge influx into the market in tenant activity, he said. Up until now the largest amount of positive absorption has occurred as a result of tenants relocating to the Santa Clarita Valley from the San Fernando Valley and Burbank area.

But the SCV market is approaching recovery, House said. In a balanced market, neither the landlord or tenant has any particular advantage and the leverage is pretty evenly balanced between the two parties, he said.

“The outlook is positive. There’s sufficient space within the market to give tenants the opportunity to potentially relocate or the space to grow into,” House said. “When you dip below 10 percent or into the single digits then there are very few opportunities for tenants and that becomes very difficult.”

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