Report looks at changing face of industrial and office real estate





 

 

Location, location, location, has long been the go-to answer Realtors give when asked what’s the most important factor when looking at real estate.

Location plays a big part in the rental costs and vacancy rates in Ventura County’s commercial real estate market—the Conejo Valley remains highly coveted while smaller cities like Moorpark struggle to fill industrial and office parks—but a 2016 report released by DAUM Commercial Real Estate Services says other factors also impact the going rates for office and industrial space.

A pricey housing market, the loss of developable land due to SOAR, rising construction costs and changes in technology all shape the commercial market.

The report looked at the markets for industrial and office space.

Industrial space

Michael Foxworthy, executive vice president/branch manager for DAUM, said the lack of developable land is affecting all aspects of the commercial real estate market, especially industrial space.

“The industrial sector is running out of (land). This has been going on for some time. It’s getting harder and harder for tenants to find space very quickly,” Foxworthy said. “It’s a combination of SOAR initiatives and a NIMBY (not in my backyard) attitude. There’s very little developable land.”

According to the 2016 year-end report by DAUM, which assesses market conditions for industrial and commercial office space in Ventura County, the vacancy rate for industrial space is 3.6 percent. That means it’s unlikely buyers and renters will see any slowing in the rising cost of industrial space, the report said.

Despite the fact that the median sale price for industrial space has increased 25 percent between 2013 and 2016, the county last year finished with the second highest number of industrial space sales in the past decade, the report shows.

So why aren’t developers building new industrial space if it’s such a hot market?

Foxworthy said land-use restrictions and rising costs for construction—namely fees and permits—create little incentive for developers to build.

“There’s a lot of land in Ventura

County, but it cannot be developed,” Foxworthy said. “And cities, in order to grab revenue, have increased their fees for development. Then there are all these new regulations concerning environmental issues. It has really driven the costs to construct up. It’s hard for a developer to pencil in a profitable project.”

The lion’s share of industrial space in Ventura County lies in Oxnard and Port Hueneme, with 34 percent; Camarillo 17 percent; and the Conejo Valley 12 percent; while Simi Valley and Moorpark combined are at 17 percent.

Office space

Foxworthy said vacancy rates for office units are higher than those for industrial due to the effect of advancing technology.

Faster internet speeds in homes have given employees the ability to telecommute. With fewer employees in an office, the companies can get by with less space.

According to the report, there are no new office buildings under construction in the county.

Of the 348,000 square feet of office space in the area, the Oxnard Plain is home to 35 percent, Westlake Village 23 percent, Calabasas 13 percent, Simi Valley/Moorpark 12 percent, Thousand Oaks 11 percent and Agoura Hills 6 percent.

Office space rents increased 2 percent from 2015 to 2016.

Here are the current averages for vacancy and rental rates:

Simi Valley/Moorpark has a vacancy rate of more than 25 percent with an average rent of $1.80 per square foot.

Agoura Hills has a 17 percent vacancy rate with an average rent of $2.20 per square foot.

Thousand Oaks has a 13.7 percent vacancy rate with an average rent of $2.34 per square foot.

Calabasas reports a 7-percent vacancy rate with an average rent of $2.53 per square foot.

Westlake Village has a 10 percent vacancy rate with an average rent of $2.64 per square foot.

To see the full DAUM report, visit www.daumcommercial.com/Services/research/researchReports.


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