Vacancy Rates

As the regional economy continues to sputter, vacancy rates are beginning to climb at warehouses and distribution centers for industrial goods, putting the already hard-hit Inland Empire at further risk of decline and threatening facilities in Los Angeles and Orange counties as well. After years of high occupancy and rapid construction of cargo hubs, immense spaces are now standing empty.

Compared with most of the region's white-collar office market, the less corporate environs of Santa Monica and Venice are looking sharp. Technology and entertainment companies that long ago mastered the knack of making money without dressing up are now paying top dollar to rent space in some of Southern California's most desirable neighborhoods. The office vacancy rate in downtown Santa Monica is a mere 4%, a fraction of the county average, said real estate broker Craig Kish of Jones Lang LaSalle.

For some, construction kicked off during better years, when office rentals in prime locales seemed a sure shot for developers. Others are older, once bustling but now deserted after hemorrhaging tenants during the economic downturn. But one way or another, they are among the emptiest office buildings in Southern California. A number of the highest- vacancy buildings are in Burbank and Glendale, according to data from CoStar Group Inc. The real estate research firm looked at the percentage of space that was rented out at Class A office buildings with 300,000 square feet or more.

In a sign that the nation's foreclosure crisis is taking a toll, renters surged into the U.S. apartment market in the third quarter, pushing up rents and driving down vacancies. The national vacancy rate fell to 7.2% in the third quarter from 7.8% the second quarter, one of the sharpest drops on record, according to New York-based real estate research firm Reis Inc. Rents increased 0.6% to an average of $980 a unit over the same period as landlords were able to cut back on free rent and other incentives that had been used to attract and retain tenants in a weak market.

The percentage of vacant housing units in Orange County has increased slightly, moving from 5.46% in January, 1990, to 5.56% in January, 1991. There is a strong regional aspect to the latest figures, with five South County cities topping the 1991 list. Laguna Beach has the highest rate this year; La Palma the lowest. Bucking the overall change, 18 cities recorded drops in vacancy, led by the 1.58% decrease in Dana Point. That change allowed Dana Point to drop from No.

Fallbrook Mall, the West Hills discount mall owned by Fallbrook Square Partners, and managed by General Growth Management of Minneapolis, Minn., said leasing vacancy rates have decreased from 28% in January, 1994, to 5% in October. The improvement came with the recent opening of two new retail stores, Burlington Coat Factory and K mart. A third store, Old Navy, a division of the Gap, is scheduled to open Oct. 27.

Vacancy rates in the Burbank and Glendale office space markets declined during the second quarter ended June 30, according to a study by Glendale-based CB Commercial Real Estate Group Inc. Among office buildings with 100,000 square feet of space or more, the total vacancy rate in Burbank dipped to 6.7% at the end of the second quarter, the report said, down from 8.9% for the first quarter. In the second quarter a year ago, the vacancy rate among such buildings was 10.5%.

Ventura County's office vacancy rate dipped slightly in the third quarter, but industrial and retail vacancies rose. The latest office rate, 22.6%, compares to 22.7% in the second quarter and 24.9% a year ago, according to a study by the Oxnard office of Grubb & Ellis Commercial Real Estate Services. Industrial vacancies amounted to 12.7% in the latest quarter, up from 12.5% in the previous three months but below the 15% of the third quarter of 1992. Retail vacancies stood at 9.

The increase in U.S. office vacancies slowed in the third quarter as companies put less space up for sublease and development fell, according to Cushman & Wakefield. About 14.4% of downtown office buildings were vacant as of the end of September, compared with 14.1% at the end of June and 13.2% in March, the property broker said. The amount of space available for sublease fell for the first time since 2000.

Office vacancy rates in Ventura County fell to 23.5% from 24.4% in the second quarter, according to a survey by CB Commercial Real Estate Group. Oxnard had the county's highest office vacancy rate at 29%, while Westlake Village had the lowest at 16.9%, the survey said. Industrial vacancies countywide fell to 13.2% from 14.3%. Newbury Park had the highest industrial vacancy rate with 24.2%, according to CB. The county's retail vacancies rose to 8.4% from 7.9%.

Southern California property professionals are saying good riddance to 2009's rising office vacancies and falling rents, and conjuring hope for somewhat better times later this year. The recession brought layoffs to many white-collar companies, prompting tenants to downsize their offices and sometimes plead for rent reductions. Strapped landlords saw their revenues fall as fewer tenants paid less money to occupy their buildings. Real estate brokerage Colliers International tellingly headlined a recent report: "2009: End of a year gone bad."

For some, construction kicked off during better years, when office rentals in prime locales seemed a sure shot for developers. Others are older, once bustling but now deserted after hemorrhaging tenants during the economic downturn. But one way or another, they are among the emptiest office buildings in Southern California. A number of the highest- vacancy buildings are in Burbank and Glendale, according to data from CoStar Group Inc. The real estate research firm looked at the percentage of space that was rented out at Class A office buildings with 300,000 square feet or more.

While hotels across the country continue to struggle with slumping occupancy rates and sliding revenue, industry data released Tuesday show signs of improvement in several regions, including Southern California. The hotel occupancy rate nationwide dropped 5.4 percentage points to 59.8% in the first week of October, compared with the same period last year, while revenue per available room fell 12% to $59.28, according to Smith Travel Research Global, an industry research firm. The numbers are the latest in a series of reports chronicling one of the worst slumps in decades for the hotel industry.

Hoping to keep its 119 rooms filled, Hotel Erwin on Venice Beach is offering an unusual promotion for its countercultural clientele: an Ink and Stay package that includes $100 toward a tattoo and a bottle of tequila to numb the pain. Down the coast at the Hard Rock Hotel in San Diego, guests who get the Hard Rock and a Hog deal can roll through the All-American City on a Harley Davidson motorcycle that comes complimentary with a two-night stay. But for hotel perks, it's hard to beat the deal offered at the Four Seasons Hotel in Beverly Hills, where your stay comes with a free rental of a Mercedes, Porsche or BMW convertible.

On a recent bright afternoon in Redondo Beach, rent signs baked in the sun outside half the small stucco apartment buildings along the stretch of Beryl Street between Flagler and Harkness lanes. "I've never seen it this saturated with rentals," said property manager Vickie Callahan, who owns a three-unit and a four-unit building in the area. "It's very scary." It's a scene playing out across the Southland.

In the heart of affluent Studio City, "for lease" signs dot the Ventura Boulevard shopping district, and cars zoom past vacant storefronts. "This was the main drag historically," said Lynn Crandall, who owns an art sales and picture-framing business on Ventura near Laurel Canyon Boulevard. "Now it's become like a ghost town."

High housing vacancy rates in Vacaville set it apart from most other cities in California, according to a recent report by the planning commission. Rental vacancy rates in Vacaville are 5.1%, the ideal balance between the interests of landlords and tenants, economists and planners say. Cities with a vacancy rate of less than 3% are considered to have a shortage.

A large local real estate broker said Wednesday that vacancy rates in Orange County's larger office buildings could soon drop below 20% for the first time in nearly five years. At the end of the first half of this year, the rate was 20.5%, said Coldwell Banker Commercial Real Estate Services. But that has been dropping more or less steadily from a peak of 23% in early 1988.

Layoffs, tight credit and other fallout from the troubled economy have battered Southern California's office market, leading to vacancy rates as high as 30% in some areas. The pain is expected to continue for months, if not years, with vacancies rising even as the economy shows modest signs of recovery, according to industry observers tracking activity in the first quarter. "We have a rough road ahead of us," said Joe Vargas, senior managing director of real estate brokerage Cushman & Wakefield.

"Empty," says Jack Rodman, an expert in distressed real estate, as he points from the window of his 40th-floor office toward a silver-skinned prism rising out of the Beijing skyline. "Beautiful building, but not a single tenant. "Completely empty. "Empty." So goes the refrain as his finger skips from building to building, each flashier than the next, and few of them more than barely occupied.