The San Fernando Valley Has Low Office Rents, And That Is Just Fine With These CRE Pros
Affordable rents and perks like free parking are working in the San Fernando Valley's favor, helping keep its vacancy rates relatively low and keeping it attractive for officer occupiers and other sectors.
"In the office world, things are pretty healthy," CBRE Senior Vice President Natalie Bazarevitsch told an audience at 500 N. Brand Blvd. in Glendale for Bisnow's Future of Tri-Cities and San Fernando Valley event. "Now, the reason it's so healthy on the office side is because of the diversity of the tenant base, but also it's affordable."
While the SFV is struggling with many of the same challenges as other areas of the city, rents just over $2 per SF in some places, "for some great office space, large floor plates, free parking in many instances and the good freeway infrastructure," are bolstering the market, Bazarevitsch said.
The Valley has about 23M SF of office inventory, with a 13.8% direct vacancy rate, putting it well below the Los Angeles County average of 19.2% and the greater LA average of 18.9%, according to a Q3 CBRE report.
According to CBRE, in the third quarter of 2023, the average full-service gross asking rate for Class-A office in the Valley was $2.86 per SF, a huge discount from the greater LA average of $4.25 per SF.
"You can't find institutional product anywhere in Los Angeles ... for less than what you're going to get in Sherman Oaks, Encino, Woodland Hills," LPC West Senior Vice President Kent Handleman said. The low rent "keeps tenants kind of sticky," according to Handleman.
The attention the Valley has received from Rams owner Stan Kroenke was also a topic of interest, including the potential effects Kroenke's ownership of large assets in the Warner Center area could have on the Valley overall.
Kroenke spent $325M at the beginning of 2023 to buy a 600K SF mall from Unibail-Rodamco-Westfield. In 2022, he purchased the Promenade Mall property, also from URW, for $150M, as well as a large office building and its surrounding parking lot.
While it's still unknown what Kroenke's plans are for these sites, the Promenade mall property is entitled for a massive mixed-use development including housing, retail, office, hotel and entertainment space, including a venue that can hold at least 7,500 seats.
"Hopefully, we're going to see him build that stadium," Parker Brown CEO John Parker said.
