Demand for commercial real estate stays strong
By Daniel Wolowicz camarillo@theacorn.com

Industrial, retail and office real estate in Ventura County remains in high demand throughout the region, said experts at last month's Ventura County commercial real estate symposium hosted in Oxnard by Camarillo-based CB Richard Ellis.

Despite inflated construction costs and dwindling open space, a healthy overall economy has helped keep commercial real estate going strong, experts said.

Retail

After three years of shrinking vacancy rates, retail space availability leveled off in 2006 to post a 3.8 percent vacancy rate. The previous year's was 3.3 percent.

"This leveling off represents nothing more than a healthy adjustment to the unprecedented growth we have experienced over the past couple of years," said David Rush, Ellis' senior vice president, retail properties. "With several new projects being planned and under construction, the market should gain additional momentum in 2007."

Completed in 2006, one of the biggest retail developments in the East County was the 135,000-square-foot Village at Moorpark shopping center by Nearon Enterprises and M.W. Ossola and Associates Inc.

Also completed last year was The Terrace, a 40,000-square-foot mixed-use development on Newbury Road in Newbury Park.

On the horizon, Rush said Costco Wholesale is looking to build a 153,148-square-foot store off Wendy Drive just north of the 101 Freeway in Thousand Oaks. Also in Thousand Oaks, a number of shopping centers are due for major facelifts, including the Conejo Gateway and Ventu Plaza.

Developers in Moorpark also expect to break ground soon on Tuscany Square, a 70,000-square-foot shopping center, which they hope will be completed by this summer.

The shopping center will reportedly be anchored by a Walgreens and a Tesco supermarket, a new boutique grocery store owned by the London-based company with the same name.

Rush said Nordstrom, one of the tenants expected to arrive at The Oaks mall in Thousand Oaks next year, continues to generate the most buzz.

Office

Office space continues to be one of the county's tightest markets, experts said, and last year was no exception.

"The 2006 office leasing market was healthy and robust," said Tom Dwyer, Ellis' senior vice president, office properties. "Strong demand by large users combined with record low vacancies caused office rents to increase by 12.4 percent over the past 12 months."

Available office space remained in high demand, especially in the Conejo Valley, where vacancy rates dropped from 7.1 percent in 2005 to a record low 6 percent in 2006. Countywide, vacancy rates dropped to 7.6 percent in 2006 from 8.1 percent for the same period in 2005. As a result, lease rates continued to climb.

Cost per square foot for a Class A, steel and glass office building was $2.54, while Class B building space, typically wood and stucco, went for $2.07 per square foot, officials said.

Dwyer said that rents in new office buildings could jump 25 percent due to increased land value and skyrocketing construction costs.

Although experts say 1 million square feet of office space is under construction throughout the county, only about 960,000 square feet is expected to be built in 2007--nearly half what was planned in 2006.

That reduction will help slow the vacancy rate, which is expected to climb to more than 9 percent this year.

"In the coming year, it is anticipated that higher vacancy numbers will emerge as new office developments are completed," Dwyer said.

In the Conejo Valley, two expansive office complexes are expected to break ground this year. The 462,000-square-foot Steadfast office development is situated just south of the 101 Freeway off Westlake Boulevard. The two-phase project's first phase is expected to be completed by the end of the year.

The second large development will be the two four-story buildings of the 346,000-square-foot Opus West office park to be built on a 22-acre lot on Russell Ranch Road in Westlake Village, just north of the 101. The site was once slated for a 227,000-square-foot Lowe's store.

Office condominiums are the fastest growing office space market. Last year, more than 712,000 square feet of office space opened throughout the county. Asking sales prices for condos in the Conejo Valley hit upwards of $550 per square foot.

There were two standout sales last year: pharmaceutical giant Baxter sold its headquarters for $92 million to New York-based developers Tishman Speyer, then leased back a portion of the building. Lincoln Properties paid $90 million for the Malibu Canyon Corporate Center.

Industrial

Similar to the market for office and retail property, industrial space remains strong throughout the county, said Paul Farry, Ellis' senior vice president of industrial properties.

"The Ventura County industrial marketplace posted a record low year-end vacancy percentage of 5.6 percent," Farry said. "Fueled by small business expansions and industrial condominium sales, building prices correspondingly increased 25 percent."

According to Farry, the drop in land availability and the reduced number of new buildings will force land and building prices and lease rates even higher this year.

Rental rates in Simi Valley jumped 10 percent last year, Farry said.

One of the major transactions in Moorpark was investment firm Goldrich and Kest's purchase of a 204,000-square-foot building.

Also significant in Moorpark was Warehouse Discount Center's lease of a 100,000-square-foot building just off Los Angeles Avenue south of the 118 Freeway.

In Camarillo, the primary development in industrial property was the completion of Told Corp.'s 136,000-square-foot complex on the corner of Flynn and Adolfo roads in the Flynn Road Business Park. According to Farry, more than half of the units have been sold in the recently completed facility.

Camarillo, however, will take a major hit when Technicolor closes its 900,000-square-foot manufacturing and packing plant along the 101 Freeway. The media giant recently laid off 630 workers at its Camarillo facility.

Less than a mile south, two industrial buildings on Camino Ruiz--both around 100,000 square feet--remain empty. Taken together, all three buildings will probably account for more than 1 million square feet of available industrial space within a very small radius.

The Conejo Valley saw the purchase of more than 460,000 square feet of space in Newbury Park by Spectrum gyms, and Amgen added another 63,000 square feet of industrial space in Thousand Oaks.

Farry said "2007 should see rents continuing to climb due to low vacancies and the ongoing lack of vacant land. We anticipate that commercial real estate will not follow the current residential market slowdown."