Specialty Office Strength – San Fernando Valley Business Journal
EEven during the pandemic, commercial real estate in the areas of medical practices and life sciences has proven to be a reliable commodity for investors. Sectors continue to do well in the San Fernando Valley.
The Tri-Cities have seen medical buildings trade for nearly $25 million each while the Conejo Valley Life Sciences Corridor of Thousand Oaks, Newbury Park and Westlake Village – originally launched by Amgen Inc. — saw its limits extend to Agoura Hills and Santa Clarita.
Last September, a 50,986 square foot medical office building on the Burbank campus sold for $23.9 million, or $468 per square foot.
Business real estate firm Cos GPI. purchased the property at 2701 W. Alameda Ave. from a private real estate investor. Mark Shaffer, Anthony DeLorenzo, Chris Bodnar, Lee Asher, Gerard Poutier and Cody Chiarelle to CBRE Group represented the seller.
The property has come on the market for the first time since it was built over 50 years ago. The building was 90% leased to a diverse mix of 22 medical tenants, most of them doctors working at Providence Saint Joseph Medical Center in Burbank – one of the largest employers in the San Fernando Valley.
“Healthcare investors continue to target markets with strong tenant demand and proximity to a dominant hospital campus,” Bodnar of CBRE’s Healthcare and Life Sciences Capital Markets said in a statement. a statement. “Property 2701 W. Alameda is very well positioned for the future.”
Shaffer said the 2701 W. Alameda property has met strong demand — more than 20 offers. The medical office is a market with strong underlying fundamentals.
“Institutional interest in medicine has only grown. Health care depends on location – proximity to strong health care systems,” Shaffer said. “You tend to see longer tenancy terms and tenant retention with medical. This is ideal if you are a primary buyer looking for a longer and more secure investment.
According to CBRE research, the vacancy rate for medical offices in Los Angeles in the first half of 2021 stabilized at 10.5%, well below the overall office market vacancy. Burbank had one of the tightest medical office vacancies in the market, at 4.9%.
In adjacent Glendale last August, a multi-tenant medical office building on the campus of Glendale Memorial Hospital and Health Center traded for $24.8 million at MedProperties Real Estate Advisors, a Dallas-based healthcare-focused private equity firm. Brokerage Kidder Mathews closed the deal.
The six-story, 67,060 square foot medical office building at 1510 S. Central Ave. is located on the campus of the 241-bed Glendale Memorial Hospital.
Built in the 1980s, the building has undergone extensive renovations over the past two years. The facility was 89% leased to a diverse mix of long-term healthcare tenants in the areas of ophthalmology, dialysis, orthopedics, podiatry, bariatrics, dermatology and of hematology.
“The on-campus location and the stability of the tenant base, we believe, have combined to provide an excellent investment opportunity for our business,” said MedProperties’ Director of Acquisitions. Jon Fouger in a report.
William Boyd to Kidder Mathews, who helped broker 1510 S. Central Ave., said medical buildings are a solid investment in the Tri-Cities.
“The investment market is still strong for medical products,” Boyd said. “There are currently buildings in receivership that cost between $225 and $250 per square foot, but medical buildings are trading at over $300 per square foot. The economy of a medical building reaches higher rates than the office.
Boyd does not believe that the Covid period added significant value to medical buildings because during this period of distancing doctors were practicing telemedicine.
“It didn’t translate to a landlord charging higher rent,” Boyd said. “It would have been the only way (a medical building) to have more value. So there was no spike in values during Covid. This confirmed that medical rentals were increasing or flat relative to office space, which was rotating.
Dana Nialisa broker who runs CBRE’s health services group, traded the building at 7345 Medical Center Drive in West Hills for $20.5 million.
“It was an existing medical office building right next to the West Hills Hospital campus,” Nialis said. “We had a huge interest. The building was sold to Healthcare Realty Trust, a healthcare REIT.
Nialis sees a lot of investment being spent in the medical space. Leasing has also been an incredibly active sector.
“It’s been pretty busy for several years,” she says. “It’s definitely been picking up for a year or two, but we’ve seen more activity now.”
With a lot of private capital being spent in this space, “we’re seeing greater velocity,” Nialis said.
Although individual investors are bidding, Nialis said “it’s getting harder and harder to compete with these institutional groups that are very well capitalized.”
Even in the face of the pandemic, the Conejo Valley Life Sciences Corridor – originally started by Amgen – continues to thrive and has seen its boundaries expand beyond Thousand Oaks, Newbury Park and Westlake Village .
“The boom predates the pandemic,” said mike tingusindustrial broker at Lee and Associates North Los Angeles-Ventura. “From 2009 to 2018, the amount of laboratory space in the United States grew from 17 million square feet to 29 million square feet.”
Tingus said of the life sciences expansion, “It’s not just in the Conejo Valley, you see it in Pasadena and the San Fernando Valley.”
Shadd Walkersenior vice president at Necklaces which specializes in the sale and lease of office and R&D properties, said the Conejo Valley continues to be ideal for life sciences and the venture capitalists investing there.
“We see requirements in the market, then we compare buildings that might be suitable for the lab space,” Walker said.
Alexandria Real Estate Stocks just purchased 19 acres of land from Amgen in Newbury Park.
“They are going to develop a 300,000 square foot life sciences campus,” Walker said. “We are seeing it, but it will take years to develop.”
Walker describes Alexandria as the largest life sciences operator in the United States
“They are headquartered in Pasadena, but this will be their first campus in Los Angeles,” Walker said. They are huge in Seattle, San Jose, San Diego and Boston.
They chose Newbury Park, Walker said, because “there’s a cluster there with Amgen and everyone wants to be near Amgen. This is where the labor is to be hired.
In Pasadena, Angelo Gordon and Lincoln Properties purchased property at 465 N. Haltstead to convert to life sciences. They signed a lease with Xencor for 250,000 square feet.
“The root of the request has been that there’s a lot more emphasis on gene therapy,” Walker said. “It seems industry is driving it. We see venture capital on an unprecedented scale. »
“Venture capitalists are looking to take their research, take their technology, and commercialize it on a much larger scale,” Walker said. “As these small companies get a $60 million investment, they will grow and intensify their research and development. So they are looking for larger facilities.
In March, Agoura Hills Business Park was sold in an off-market transaction for $29.7 million.
Built in 1987, the 6-acre campus, which consists of a pair of two-story office buildings around a central plaza with surface parking for 193 vehicles, faces Highway 101 at 30401- 30501 Agoura Road. port partners and United StatesThe joint venture acquisition of the 113,991 square foot office campus is typical of demand for properties that spill out of the Thousand Oaks biotech corridor – in this case into Agoura Hills – as the two companies see continued expansion of Life Sciences in the Conejo Valley, According to Gemdale’s Executive Director and Head of Acquisitions Tim Nguyen.
“Part of the property has been successfully converted into laboratory space, which fits well with our optimistic view of the growing demand for life sciences in this emerging submarket,” Nguyen said in a statement. “Despite the headwinds of Covid-19, Harbor has increased occupancy to 94% by attracting life science groups that have been actively growing in the Conejo Valley.”
Another biotech cluster outside of Conejo Valley is in Santa Clarita, such as the Southern California Innovation Park at 25101-25161 Rye Canyon Loop. Oxford Properties paid $134 million last September for the asset. Tenants of the 14 buildings spread over 118.5 acres also include Bioness, animal behavior, Quality and Scientific Bostonwhich occupies 162,000 square feet.
“Now you see investment in this neighborhood as more and more businesses want to be near them,” Walker said.
Even before the pandemic, interest in the Conejo Valley biotech sector was high.
In August 2019, a joint venture between the Chicago-based company Singer Real Estate and based in Los Angeles HATCHspaces acquired the 160,980 square foot Think Here campus located in Thousand Oaks at the Conejo Spectrum Business Park from Harbor Associates.
The acquisition was rebranded as part of HATCHspaces’ growing portfolio of specialty life science facilities. The new HATCHcampus @Conejo Spectrum builds on the current slate of science-based enterprises to foster a much-needed center of life science activity in the Conejo Valley.
“We are very excited about the momentum of the science industry over the past 12 months in the Conejo Valley,” said the co-founder of HATCHspaces. Allan S. Verre at the time. “It’s very much like the early years of San Diego when Hybritech alumni started creating new businesses, like seeds in a biotech forest. The presence of Amgen’s headquarters has the same impact in the region.
“The Los Angeles area is having its moment in life sciences,” added the HATCHspaces co-founder Howard Kozloff. “More than $1 billion in annual investment from the (National Institutes of Health) alone is in the hands of extraordinary researchers and supporting institutions in the Los Angeles area.”
“The Conejo Valley checks all the boxes for us,” said SRE manager Kiley Stevenson. It is home to several mature life science companies and the quality of life in Thousand Oaks is truly second to none.