LOS ANGELES—Xebec and Cornerstone Real Estate have partnered to build the Sun Valley Business Center, a two-building, 361,038-square-foot industrial facility in Sun Valley, CA. The $58-million project is the first of its kind in the submarket, which has one of the lowest vacancy rates in Southern California. The joint venture purchased the 15-acre land site for the development in October 2015.
"The market is what we call hyper tight," John DeGrinis, EVP at Colliers International, tells GlobeSt.com. "That is an extreme term, but in the San Fernando Valley proper, the overall vacancy rate for the market is below 1%. If we look at the Central Valley, the vacancy rate is .1%, and in the East Valley, where the subject property resides, the vacancy rate is .5%. We are so in need of buildings, and we just don't have any. At this time right now, there is not one building that is 100,000 square feet or higher in the San Fernando Valley that is vacant for a user to move into." DeGrinis is marketing the project, along with VP Patrick DuRoss and AVP Jeff Abraham.
The solution to the supply problem is not easy, since there is virtually no land in the valley. This land site is in a transitioning pocket of Sun Valley, which was formerly used for heavy industrial uses. "This pocket is transitioning to higher-end uses. Most of the valley has been completely built out. This site is unique because it is an area that was formerly used by people that were storing trucks, doing auto dismantling and some of the heavier industrial uses, and this is significant because we are now seeing a state-of-the-art, class-A industrial building being built on this land that was formerly for dirtier uses that you would find in the industrial zones."
The speculative development has just broken ground, and is scheduled for completion in 2017—and DeGrinis has already gotten some interest from a handful of users. "Because the vacancy rates at this time are so problematically low, if the building were standing today, it would be leased two times over," he says. "We have at least four users that would love to be able to secure a transaction at this time, but because the building isn't going to be delivered until sometime in 2017, it is a little too early to transact."
Xebec and Cornerstone plan to hold onto the property after construction and lease out the two buildings. "Some of the preliminary users that we have are your typical industrial, but because we have a building that has never been seen in our market, we have had some interest from the entertainment folks that exist in our market," adds DeGrinis. But, the user base in this market is broad, partly because of the proximity to the 5, 210, 101 and 405 freeways.
The joint venture is funding the $58 million development with its own capital and a $47 million senior loan for new development from PCCP. Once complete, the warehouses will have state-of-the-art features that include a 36-foot clear height, ESFR sprinkler systems and 54 total dock doors.
This is not Xebec's only Southern California development. In October, the developer also purchased 12 acres in Vernon with plans to build a state-of-the-art facility in that market as well.
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Kelsi Maree Borland
