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November 28, 2023
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Los Angeles County North - Santa Clarita - Valencia

This section covers what we call L.A. County--North, which is primarily the Santa Clarita Valley, including Valencia and the city of Santa Clarita. We last covered the new development projects in this area of LA County a year ago, and a fair amount of construction has started up or been completed since then. To refresh our collective memories, let's start with the brief overview of the area that we outlined in that last account. First, in terms of location, this market is located about 30 miles north of downtown Los Angeles, via the I-5, and depending on conditions, can take anywhere from 35 minutes to an hour and thirty-five minutes to get there from West LA. There is quite some relocation taking place there from the San Fernando Valley, just a few miles south.

Valencia was master-planned, developed and remains largely under the control of Newhall Land & Farming Company, a NYSE company (not a REIT), founded in 1883 by the five sons of Henry Mayo Newhall. The elder Newhall left his sons 143,000 acres in the Santa Clarita Valley, and during the next 70 years much of it remained farmland. In the late 1950s, the rapid development of Southern California began to exert pressure for development in the Valley. This led to Newhall Land's decision to build what it called a "new town", a full-service community it named Valencia, after the type of oranges they grew there. In 1965, the LA County Planning Commission adopted the master plan for the community. For the past 34 years, Valencia has grown in a very controlled manner, largely because Newhall Land controls the supply and is dedicated to maintaining Valencia as one of the most livable communities in the nation.

Regarding the current state of commercial real estate in Valencia, pure office space still does not play a big role in this market, although many were expecting office space to take off here a few years ago. And it shows in the supply numbers, with only about 2 msf plus of office space in the SCV, compared to more than 16 msf of industrial-type space. Yes, the modern industrial building drives this market, with modern high-tech assembly, manufacturing, distribution and office facilities sprouting up in commercial subdivisions known as Valencia Commerce Center, Gateway, Highridge Business Park, Corporate Point, Valencia Industrial Center, Valencia Corporate Center, and now Centre Pointe. Newhall is also entitled to add another 15-20 million sf of this type of space, however, the company will likely continue developing its remaining entitlements in a controlled way, by gradually selling off parcels to major developers such as EJM, Investment Development Services, IIC, and most recently to Opus West Corp, which then build and lease or sell the buildings. This method of development keeps both land values and rents on the rise, while slowing down the strains on the quality of life inherent in growth that occurs too rapidly.

Land for a corporate business park site is now fetching from $9.75 to $19 per sf, which is up significantly from three years ago, when the average price for land was $12/sf. Rents in new facilities are up in the $0.65-$0.85/sf/mo NNN range, when three years ago they were barely breaking fifty cents, and some industrial buildings are on the market for sale at prices in excess of $100/sf. Whatever new office space is out there is going for over $2/sf/mo FSG, with one deal at the not-yet-completed Westridge Executive Plaza being inked at $2.75/sf/mo FSG.

Our friends at CB Richard Ellis, which represents all of Newhall's product and much of everything else in the Valley, report that at Valencia Industrial Center and Valencia Commerce Center, overall vacancy rates had risen to 12.4% through the end of Nov '02. However multi-tenant space was reported to have a vacancy rate of 6.6%, with the non-multi-tenant rate now at 13.1%. This was a result of the demand for smaller buildings remaining fairly strong, while most of the larger buildings stood vacant for quite some time. They also report significant improvement in the absorption rate, which netted out at negative 482.3k sf in 2001, but has rebounded with a positive 917.2k sf this year. There is 82.9k sf under construction here, with more than one msf of additional product on the boards, and the word is that the market will be on the upswing next year. At least we'll see the continuing development, especially west of Highway 126, where most of the vacant land is located.


27027 Tourney Road. Lowe Enterprises is well along in the construction of the 200k sf Specialty Laboratories HQ/lab facility on the 13.8-acre site pictured here, which was purchased in Jan '02 from Newhall Land & Farming Co. Although the deal price was not disclosed, the LA Times, at the time of the sale, suggested it was around $8 mil, which works out to just over $13/sf. Construction is being handled by Lowe Enterprises Real Estate Group, working from plans created by HLW International. Gerald Porter of CRESA Partners repped the laboratory testing firm, which will relocate from Santa Monica to its new home, upon completion of the building scheduled for mid-2003. Doug Sonderegger and Craig Peters of CB Richard Ellis represented Newhall in the deal. Specialty works with medical discovery companies to develop tests that can lead to the creation of new medical care processes and medicines. Newhall had subdivided the land on Tourney Rd, which runs just east and parallel to the I-5 freeway between Magic Mountain Parkway and Valencia Blvd, into 15 lots and, other than a few buildings for US Borax and Kaiser and another owned by Arden, not much had been happening there until the start of the Specialty project.

26650 The Old Road. On the west side of the I-5, Donahue/Tanner is developing a four-story, 66.2k sf Class A office building slated for a late 2003 completion. Intertex is constructing the building from plans inked by Metro Architecture and the site, already graded and ready for construction, is seen here. The project, which is 50% pre-leased to Wells Fargo Bank and Realty Executives, is located at the entrance to the new master-planned community of Westridge and the Tournament Players Club golf course. The inimitable North County brokerage team of Craig Peters and Doug Sonderegger, with CB Richard Ellis, are the listing agents and they are quoting rents of $2.45/sf FSG with 4:1000 parking and $30 T.I.s. The CB team repped Realty in its lease for the entire third floor, consisting of 20.9k sf, for five years in a deal valued at $3.07 mil ($2.45/sf/mo FSG). Wells Fargo, repped by CB's Nancy Stark, took 5k sf on the first floor for five years and its deal for the smaller space went for $2.75/sf/mo.

Rockwell Canyon Rd, McBean Parkway and Interstate 5. There are 60 acres of raw land here, of which 23 acres are usable, and while not quite located within Valencia Corporate Center, its close enough for us to include here. This parcel backs up to the College of The Canyons, and Newhall sold the land, bounded by McBean Pkwy, Rockwell Canyon Rd , and I-5 Fwy, to Packard Humanities Institute. The Institute is a non-profit foundation started by David Packard, son of Bill Packard of Hewlett Packard fame, who will develop a future campus for the UCLA Film and Television Preservation Center on the site. Brokering the deal for the buyer was John Tabb of Trammell Crow Co, and while the sales price went unreported, pros familiar with the area tell us it sold for $15 mil, under $5.75/sf for the 60 gross acres. The seller was repped by the listing brokers Craig Peters and Doug Sonderegger of CB Richard Ellis. The campus will help serve experts looking to study and preserve our motion picture heritage through access to UCLA's Film and Television Archive, whose vaults hold more than 225k motion picture and television titles. Here's a view of the raw land, which sits up on a bluff overlooking the College parking lot, and we're told construction will begin once several issues between Packard and the University are ironed out.

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