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Local office vacancy rate is decreasing

Expected to drop to 16 to 18 percent by end of quarter

Posted: January 20, 2013 2:00 a.m.
Updated: January 20, 2013 2:00 a.m.

The U.S. Borax building on Tourney Road. SCV office space vacancy is decreasing. (Jonathan Pobre)

 

The Santa Clarita office market shrunk in the fourth quarter of 2012 due to the sale of three larger buildings, causing a drop in the available office space locally.

All three buildings are intended for medical use.

“While we saw decreases in industrial vacancy in early 2012, we are now seeing office leasing follow suit,” said Jonas Peterson, CEO of Santa Clarita Valley Economic Development Corp.

“Our office vacancy decreased to 13.3 percent in the fourth quarter - roughly 4 percent lower than in the second quarter,” Peterson said.

One sale closed on the long vacant Borax building on Tourney Road in October, said Nigel Stout, executive vice president with Jones Lang LaSalle whose firm represented the seller.

Kaiser

The building was sold to the Kaiser Foundation who plans to expand their medical facilities, and the services they provide, in the community, said Ryan House, vice president for JLL.

“Our client had to return the keys to the lender a number of years ago,” House said.

Built in the early 90s, the building served as the headquarters for the U.S. Borax company. Borax was later acquired by Rio Tinto, a global metal and mineral mining firm.

The four-story 117,000 square foot building was sold in 2007 to an investor who intended to convert the building into multi-tenant office space, but the market changed right around that time, House said. The owner eventually chose to return the Borax building back to the lender.

The builder had often been used for filming in the past five years.

Two other buildings closed escrow in December.

UCLA

UCLA Medical Center is opening up a medical center in the Tourney Oaks Medical Plaza, said John Erickson, senior vice president with Colliers International who represented the seller.

“It was built as a medical office facility, but the building has been vacant for a few years,” Erickson said. “It’s new, four-year old construction. It was never occupied.”

About 150 people - 25 doctors, nurses and administrative personnel - will work at the 36,000 square foot building. The deal had been in the works for close to a year, he said.

“This move is big for Santa Clarita,” said Jason Crawford, manager of economic development and marketing for the city. “UCLA is a huge name in the medical industry.”

Newhall Land

Also representing the seller, Dave Solomon, senior vice president with CBRE Commercial Properties, closed a deal on the old Newhall Land and Farming headquarters on Valencia Blvd. in December.

The approximately 45,000 square building was purchased by a group of doctors, Solomon said. They plan to use the building for medical offices but don’t want to be identified “before they finalize their group,” he said.

“They’re likely to do some renovation to build it out to be consistent with a medical office building,” Solomon said.

Although space has become available in other buildings, overall, there is a decline in the high office vacancy rates in Santa Clarita.

Improving market

While the amount available space has declined in the industrial and retail segments, the local office vacancy rate was at 21.5 percent at end of 2012, House said.

He expects it to drop to between 16 to 18 percent by the end of the first quarter 2013.

“We’re really seeing a shift at the end of 2012 and into 2013, which is a shift for the positive,” said House, who specializes in the office industry for Jones Lang LaSalle.

If the office market continues to improve through the first six months, rents could begin to go up toward the end of 2013 and beginning of 2014, he said.

“Vacancies have to get down to about 12 percent before you see rents spike,” House said.

Perhaps more important, there is still “some larger tenant activity occurring in the market once those transactions are completed,” he said.

jana@signalscv.com

661-287-5599

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