OFFICE SAN FERNANDO & VENTURA MARKET REPORT San Fernando Valley and Ventura County Witness Declining MARKET OVERVIEW The San Fernando Valley and Ventura County office market saw total vacancy decrease to 15.3 percent, which is the sixth consecutive quarter to record a decrease in the vacancy rate. Net absorption in was 244,000 square feet (), bringing the vacancy rate down by 110 basis points. Direct weighted average asking rents increased to $2.18 per square foot (P) per month Full Service Gross (FSG). MARKET INDICATORS - VACANCY 15.3% NET ABSORPTION 244,000 CONSTRUCTION 178,700 RENTAL RATE $2.18 P FSG New leasing activity was 657,630 in Q3, which was greater than the average new leasing activity recorded on a quarterly basis in 2013 of 507,850. Investors continue to take advantage of low interest rates as the sales activity in the San Fernando and Ventura County office markets remains high. The investment sale activity was as follows: Ventura Noble Associates LLC acquired 15060 Ventura Blvd in Sherman Oaks for $17.8 million ($335 P) from Noble Professional Center LLC, Respawn Entertainment LLC acquired a portfolio sale of 2 buildings totaling 73,634 in Chatsworth for $10 million ($133 P) from Telesis Community Credit Union, and Ventura County Credit Union acquired 2575 Vista Del Mar Dr in Ventura for $7.7 million ($105 P) from Ocean Vista Partners LLC. UNEMPLOYMENT 8.1% MARKET TRENDS - >> Total vacancy rate decreases from nnn16.4% to 15.3% HISTORICAL VACANCY VS RENTS V & Ventura County Office Market Q3 2010 - HISTORICAL NET ABSORPTION & CONSTRUCTION COMPLETIONS V & Ventura County Office Market -Q3 2010 - >> Weighted average asking rental rate recorded at $2.18 P $2.40 $2.35 $2.30 RENTS VACANCY 25% 20% 350,000 250,000 NET ABSORPTION CONSTRUCTION COMPLETIONS >> Leasing activity decreases to 657,630 >> There was positive demand with 244,000 net absorption $ P PER MONTH (WEIGHTED) $2.25 $2.20 $2.15 $2.10 $2.05 15% 10% 5% % VACANT (TOTAL) 150,000 50,000 (50,000) (150,000) (250,000) >> 178,700 under construction $2.00 3Q10 3Q11 3Q12 3Q13 3Q14 0% (350,000) 3Q10 3Q11 3Q12 3Q13 3Q14 1 Colliers International continuously refines its database. As a result, data reflected in this report may not be consistent with data reported in previous quarters. www.colliers.com/losangeles
MARKET REPORT OFFICE SAN FERNANDO & VENTURA SAN FERNANDO & VENTURA DEMOGRAPHICS >> POPULATION: 10,063,995 (2014 Estimate) 10,423,669 (2019 Projection) 3.57% (Growth 2014-2019) >> HOUSEHOLD INCOME: $75,972 (Average) $53,125 (Median) >> JOB GROWTH: 2.7% (past 12 months) >> UNEMPLOYMENT RATE: 8.1% (as of August 2014) VACANCY The total vacancy rate, including sublet space decreased to 15.3 percent, down 110 basis points from 16.4 percent reported in Q2 2014. A longer historical perspective shows that the vacancy rate a year ago stood at 17.3 percent. Total vacancy rates were highest in the West Ventura County (20 percent). The submarket with the lowest vacancy in Q3 was Central San Fernando Valley at 9.7 percent. A comparison by class illustrates that vacancy rates were highest for Class C space (19.6%) and lowest for Class A space (14.0%) with Class B space in between at 17.6 percent. NET ABSORPTION Net absorption was 244,000 square feet in Q3 largely due to positive net absorption recorded in all submarkets; West San Fernando Valley (98,500 ) and Central San Fernando Valley (41,600 ) and East San Fernando Valley (38,200 ), West Ventury County (32,000 ), Conejo Valley (21,200 ) and Santa Clarita Valley (12,500 ). The significant tenants that moved into their space in Q3 were as follows: Champs Charter High School of the Arts moved into 37,500 square feet at 6842 Van Nuys Blvd in Van Nuys, CallSource, Inc moved into 25,527 square feet at 5601 Lindero Canyon Rd in Westlake Village and RLJ Entertainment moved into 17,985 square feet at 6320 Canoga Ave in Woodland Hills. UNEMPLOYMENT August 2014 figures for nonfarm employment in Los Angeles County showed a recovering job market. Over the past 12 months, Los Angeles County has gained 69,100 jobs for an increase of 2.7 percent. This gain in employment led to the unemployment lowering to 8.1% compared to 10.2% one year ago. Year-over-year job gains were most significant in professional and business services (+31,800) and administrative and support services (+12,600). VACANCY BY SUBMARKET San Fernando Valley & Ventura County Office Market NET ABSORPTION BY SUBMARKET San Fernando Valley & Ventura County Office Market 25% SUBLEASE VACANCY DIRECT VACANCY 120,000 20% 0.0% 100,000 98,500 % VACANT 15% 10% 1.0% 0.3% 0.2% 0.4% 0.3% 15.3% 15.2% 16.2% 16.0% 20.0% 80,000 60,000 40,000 32,000 38,200 41,600 5% 8.6% 20,000 12,500 21,200 0% CENTRAL WEST EAST WEST VENTURA 0 WEST VENTURA EAST CENTRAL WEST P. 2 COLLIERS INTERNATIONAL
MARKET REPORT OFFICE SAN FERNANDO & VENTURA OFFICE OVERVIEW San Fernando Valley & Ventura County Office Market EXISTING PROPERTIES VACANCY ACTIVITY ABSORPTION CONSTRUCTION RENTS Submarket/ Class Bldgs Total Inventory Direct Sublease Total Total Prior Qtr Leasing Activity Current Qtr Leasing Activity YTD Net Absorption Current Qtr Net Absorption YTD Completions Current Qtr Under Construction Weighted Avg Asking Lease Rate A 142 18,703,160 13.5% 0.5% 14.0% 15.2% 390,104 1,061,904 227,400 139,000 0 178,700 $2.36 B 257 13,967,912 16.5% 0.1% 16.7% 17.6% 258,254 941,954 130,100 175,300 0 0 $2.01 C 22 879,323 19.6% 0.0% 19.6% 20.8% 9,262 21,762 9,900 19,100 0 0 $1.78 WEST VENTURA SUBTOTAL 57 3,072,782 20.0% 0.0% 20.0% 21.0% 69,017 124,517 32,000 92,400 0 0 $1.92 SUBTOTAL 31 2,071,953 15.3% 0.3% 15.6% 16.2% 48,474 30,600 12,500 57,800 0 0 $2.33 SUBTOTAL 104 6,461,620 16.0% 0.3% 16.3% 16.6% 106,384 371,200 21,200 120,400 0 178,700 $2.17 WEST SAN FERNANDO SUBTOTAL 139 14,767,300 15.2% 0.2% 15.4% 16.1% 201,223 636,500 98,500 182,200 0 0 $2.17 CENTRAL SAN FERNANDO SUBTOTAL 61 4,522,644 8.6% 1.0% 9.7% 10.6% 166,677 225,600 41,600 24,400 0 0 $2.13 EAST SAN FERNANDO SUBTOTAL 29 2,554,550 16.2% 0.4% 16.6% 18.1% 65,855 48,600 38,200 163,900 0 0 $2.31 SAN FERNANDO SUBTOTAL SUBTOTAL 229 21,844,494 14.0% 0.4% 14.4% 15.2% 433,755 910,700 178,300 370,500 0 0 $2.18 VENTURA SUBTOTAL SUBTOTAL 161 9,534,402 17.3% 0.2% 17.5% 19.1% 175,401 495,717 53,200 212,800 0 178,700 $2.08 MARKET TOTAL TOTAL 421 33,450,849 15.0% 0.3% 15.3% 16.4% 657,630 1,437,017 244,000 641,100 0 178,700 $2.18 RECENT TRANSACTIONS & MAJOR DEVELOPMENTS Orange County Industrial Market Q4 2012 COLLIERS INTERNATIONAL P. 3
MARKET REPORT OFFICE SAN FERNANDO & VENTURA >> A majority of leasing activity (60%) in Q3 occurred in Class A buildings. >> Two office buildings are currently under construction at 3059 Townsgate Rd in Westlake Village totaling 178,700 square foot of Class A office. >> The market-wide asking rents at $2.18 P FSG CONSTRUCTION There is currently 178,700 square feet under construction. A 102,100 square foot Class A office building is under construction at 3059 Townsgate Rd. in Westlake Village. The development is expected to deliver in the first half of 2015. This building has already experienced 76,600 square feet of leasing activity before it has delivered. Also, within the same office park, Westlake Park Place - Phase II, a 60,381 square foot Class A office building is under construction at 3043 Townsgate Rd. The building is expected to deliver in the second half of 2015. ACTIVITY New leasing activity during Q3 totaled 657,630 square feet compared to 809,800 square feet in Q2 2014. A majority of the new leasing activity (60%) in Q3 occurred in Class A buildings. 31,500 square feet at 21600 Oxnard St. in Woodland Hills and PlayNetwork signed a lease for 15,616 square feet at 2575 Vista Del Mar Dr in Ventura. RENTAL RATES The weighted average asking rent for direct space increased to $2.18 per square foot FSG, which is the first rental rate increase seen within the past year. Class A asking rents recorded at $2.36, Class B at $2.01, and Class C at $1.78 per square foot FSG. Average asking rents were highest in the Santa Clarita Valley submarket ($2.33 P), and lowest in the West Ventura County ($1.92 P). The San Fernando Valley and Ventura County office market remains a tenant market due to the concession packages landlords continue to offer and the large amount of available space on the market. The significant lease deals in Q3 were as follows: Prospect Mortgage LLC signed a renewal for 77,694 square feet at 15301 Ventura Blvd in Sherman Oaks, Martin Worldwide, Inc also signed a renewal for 32,000 square feet at 2475 Townsgate Rd in Westlake Village, Center for Autism and Related Disorders signed a lease for WEIGHTED AVERAGE ASKING LEASE RATES BY SUBMARKET LEASING ACTIVITY BY SUBMARKET $2.50 $2.00 $1.92 $2.13 $2.17 $2.17 $2.31 $2.33 250,000 200,000 201,223 $ P PER MONTH (FSG) $1.50 $1.00 $0.50 150,000 100,000 50,000 48,474 65,855 69,017 106,384 166,677 $0.00 WEST CENTRAL VENTURA WEST EAST 0 EAST WEST VENTURA CENTRAL WEST P. 4 COLLIERS INTERNATIONAL
MARKET REPORT OFFICE SAN FERNANDO & VENTURA OUTLOOK The San Fernando Valley and Ventura County office market has recorded positive net absorption for the past six quarters. Leasing activity in office market continues to remain strong. Lease transactions over 10,000 square feet are expected to remain strong and complement the positive net absorption trend throughout the remaining part of 2014. The gradual improvment in the economy has also contributed to new space needs for smaller tenants. MARKET DESCRIPTION The San Fernando Valley and Ventura County office market is a moderatesized market with 34.0 million square feet, representing 12 percent of office buildings 25,000 square feet and greater in the Los Angeles Basin. Leading industries in the Central and East San Fernando Valley submarkets include finance, insurance, professional services, and entertainment, and in the West San Fernando Valley and Conejo Valley submarkets, healthcare, high-tech and defense sectors. In the Santa Clarita Valley and West Ventura County submarkets, firms are predominantly from the professional, financial, high-tech and insurance services sectors. HISTORICAL LEASING ACTIVITY Q3 2010 - Q2 2014 UNEMPLOYMENT RATE United States, California & San Fernando Valley August 2014 1,800,000 9% 8.10% 1,600,000 8% 7.40% 1,400,000 1,200,000 1,000,000 7% 6% 5% 6.20% 800,000 600,000 400,000 200,000 4% 3% 2% 1% 0 3Q10 3Q11 3Q12 3Q13 3Q14 0% UNITED STATES CALIFORNIA LOS ANGELES RECENT TRANSACTIONS & MAJOR DEVELOPMENTS SALES ACTIVITY PROPERTY ADDRESS SIZE SALE PRICE PRICE P BUYER SELLER 15060 Ventura Blvd, Sherman Oaks 52,977 $17,800,000 $335 P Ventura Noble Associates LLC Noble Professional Center, LLC 20131 Prairie St/9301 Winnetka Ave, Chatsworth 73,634 $10,000,000 $133 P Respawn Entertainment LLC Telesis Community Credit Union 2575 Vista Del Mar Dr, Ventura 73,000 $7,700,000 $105 P Ventura County Credit Union Ocean Vista Partners LLC LEASING ACTIVITY PROPERTY ADDRESS LEASED LEASE TYPE BLDG TYPE LESSEE LESSOR 15301 Ventura Blvd, Sherman Oaks 77,694 Renewal B Prospect Mortgage, LLC Douglas Emmett 2475 Townsgate Rd, Westlake Village 32,000 Renewal B Martin Worldwide, Inc. Syndicated RE Investments 21600 Oxnard St, Woodland Hills 31,500 New A Center For Autism and Related Disorders Douglas Emmett 15301 Ventura Blvd, Sherman Oaks 15,616 Renewal B PlayNetwork Douglas Emmett MAJOR DEVELOPMENTS PROJECT DEVELOPER SIZE SUBMARKET STATUS ESTIMATED COMPLETION 3059 Townsgate Rd, Westlake Village Amstar Advisers 102,300 Conejo Valley Under Construction Q1 2015 3043 Townsgate Rd, Westlake Village Amstar Advisers 60,381 Conejo Valley Under Construction Q3 2015 COLLIERS INTERNATIONAL P. 5
MARKET REPORT OFFICE SAN FERNANDO & VENTURA DEFINITIONS OF KEY TERMS USED IN THIS REPORT Total Rentable Square Feet: Office space in buildings with 25,000 or more of speculative office space. Includes competitive space in Class A, B and C singletenant and multi-tenant buildings. Excludes non-competitive owner-occupied buildings, buildings that include 30% or greater of medical or retail space, and space that is underconstruction, under-renovation or off-market. Net Absorption: Net change in occupied square feet from one period to the next (includes the impact of change in vacant space available for sublease). Leasing Activity: Square feet leased from all known transactions completed during the quarter. Excludes lease renewals. 485 offices in 63 countries on 6 continents United States: 140 Canada: 42 Latin America: 20 Asia Pacific: 195 EMEA: 85 >> $2.1 billion in annual revenue >> 1.46 billion square feet under management >> Over 15,800 professionals Class A Space: Space that an image-conscious company would lease for its headquarters. Typically, this space has a very high level of finish and an excellent location, and commands the highest rents in the market. Class B Space: Highly functional, attractive space, but less prestigious than Class A Space, and commanding lower rental rates. Class C Space: Functional, competitive space, but with a lower level of finish and/or a less desirable location than with Class B Space, and commanding lower rental rates. Low-Rise: Buildings with a total of 4 floors or less. Mid-Rise: Buildings with a total of 5 to 13 floors. High-Rise: Buildings with 14 or more floors. Direct : Space in existing buildings that is vacant and immediately available during the quarter for direct lease, plus space that is vacant but not available for direct lease or sublease (for example, that is being held for a future commitment). Total : Space in existing buildings that is vacant and immediately available during the quarter for direct lease or for sublease, plus space that is vacant but not available for direct lease or sublease. Weighted Average Asking Rental Rates: Weighted by the total square feet available for direct lease. Data is based on Full Service Gross rents, and includes all costs associated with occupying the space, including taxes, insurance, maintenance, janitorial service and utilities. Reported on a monthly, per basis. Space Added (Net): Total square feet added during the quarter via construction completions, including renovated space returned to market, less total square feet taken off-market due to demolitions or conversions. Under Construction: Includes buildings that are in some phase of construction, beginning with foundation work and ending with the issuance of a Certificate of Occupancy. Technical Note Colliers International is continuously refining its database. The data shown in the historical tables and graphics in this report have been adjusted to take into account these changes in the database. This report has been prepared by Colliers International for general information only. Information contained herein has been obtained from sources deemed reliable and no representation is made as to the accuracy thereof. Colliers International does not guarantee, warrant or represent that the information contained in this document is correct. Any interested party should undertake their own inquiries as to the accuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damages arising there from. This report and other research materials may be found on our website at www.colliers.com/greaterlosangeles. UNITED STATES: V & Ventura County Office License No. 01908231 16830 Ventura Boulevard, Suite J Encino, CA 91436 TEL +1 818 905 5800 FAX +1 818 325 4000 FENENBOCK, KEVIN, J. Senior Vice President GOULD, JEFFREY Senior Associate, CCIM HENNESSEY, BRIAN Senior Vice President MATTESON, CAITLIN Research Manager Research Services MUMPER, HANS Executive Managing Director MUMPER, JACOB Associate PUTNAM, RICK Managing Director Western Region Capital Markets SALIMIAN, SHAWN Senior Associate Accelerating success. P. 6 COLLIERS INTERNATIONAL www.colliers.com/marketname