Brokers ride out recession in flat Ventura market.

Market drifts as national recovery fails to materialize

Ventura County's office market remained flat in the fourth quarter, with no big deals in sight and brokers agreeing that leasing likely will remain lackluster until the economy turns around.

Tim Grant, a CB Commercial senior associate specializing in office buildings, said the flatness of the market was reflected in fourth-quarter absorption, which totaled only 2,321 square feet.

The figure involved absorption of more than 7,000 square feet in the Oxnard-Point Hueneme submarket, but negative absorption of 4,300 square feet in Ventura and a negative 791 square feet in Camarillo.

"A lot of people feel we've hit bottom and that it's just a matter of how long we're going to bounce along the bottom until we come back up," Grant said.

"I don't think it's going to get worse. But it would take a crystal ball to figure out when it's going to get better. It all depends on the economy right now," he added.

Grant said whether the outlook is bright or dark also depends on your point of view.

He said it can be viewed as a "bright spot" that there is no new construction and none in the foreseeable future, so the vacancy rate is not likely to shoot up. But he said the lack of construction also could be interpreted as a signal to tenants.

"It's a warning to the tenants that they better jump on deals quickly because we will have a very tough market once this space leases up. Once that happens, it will be a good one to two years of lag time for the market to react and come up with some construction," Grant said.

Grant pointed out that a recent CB Commercial report showed vacancy rates rising nationally in downtown markets but falling in suburban markets.

"The two trends offset each other to produce the unchanged rate (of 19.5 percent) for metropolitan markets," the report said.

Cathy Condon, an office properties specialist in the real estate brokerage Grubb & Ellis' Ventura County office, said total net absorption for 1991 should exceed the 1990 total.

"What is really absorbing the quickest is the smaller, multi-tenant office space," Condon said. "The well-located, newer, well-maintained office buildings are absorbing very well. The older, multi-tenant buildings that are not well located are the ones that are suffering."

Condon said Ventura County is still attracting some tenants from Los Angeles County, but "not to the extent that we were a few years ago, because there is so much space available now in Los Angeles."

Condon said the vacancy rate was holding at about 26 percent in the Ventura Coastal Plain submarket. "Hopefully, we've seen pretty much the end of the shrinking back in the defense and oil-related industries in the Ventura Coastal Plain that had created a lot of the vacancy in the previous quarters," Condon said.

CB Commercial's Grant noted that the Ventura market differs greatly from many Los Angeles markets because it is so much smaller.

CB Commercial lists 5.4 million square feet of space in the market, split into the four submarkets of Ventura, Oxnard, Camarillo, and Westlake-Thousand Oaks-Newbury Park.

"It's difficult to draw comparisons because ours is such a small market relative to Los Angeles County. They've got millions of square feet available, but we're small enough that things could turn around virtually overnight if we had a few big deals take place," Grant said.

He added: "If you look at a chart of our vacancy rate over the past three years, you can see how quickly it can change. It went quickly from a very healthy suburban market -- as low as 12 percent -- up to one of the highest in the country, 28 percent. That happened in a little over the year. So the same could happen in reverse. We could be very healthy, from a landlord's perspective, within a year."

Ventura County's empty space still includes a 115,000-square-foot building in Oxnard that Chevron Corp. had planned to occupy before changing its plans and relocating to Northern California. The building remained available for sale or lease in the fourth quarter.

At least one developer, however, is still proceeding with plans for new space.

Marketing director Martin Menne of the Sammis Co. said the company "is basically ready to pull the permits and start work" on a 103,000-square-foot project at McInnes Ranch in Oxnard.

Sammis already has 411,000 square feet of industrial space in seven buildings at the site. It will add three more with the new project.

"Our question now is when to start (the new buildings)," Menne said. "We're not sure, considering the economy, how long we should wait, so we're really in the midst of deciding when we should start."

Menne said the key to the Sammis project, however, is that the developer has secured financing from Wells Fargo Bank.

"The loan is closed. It's just up to us when we want to start," he said.

Menne said none of the space in the new project has been preleased yet, but added, "If we could get one of them pre-leased right now and have to be on a timetable where someone needed to be in the space, we would start right away."

Besides the sluggish market, one factor that has been preventing construction in the city of Ventura is the continuing drought.

Ventura relies on local lakes and wells for its water because it is not a member of the Metropolitan Water District network that serves the rest of the county. The city is in the second year of a so-called "water moratorium" that has virtually stalled construction by limiting water hookups.

Miriam Mack, redevelopment administrator at the Ventura Redevelopment Agency, said the agency is hoping "something will happen with respect to water" that will enable some new construction to proceed.

"We're hoping to get an allocation from the Casitas Water District that we can use any way we choose," Mack said. "If more water becomes available to the city through Casitas or other sources, we're hopeful that the city council will" permit water hookups that would in turn allow some construction downtown.

Mack said the city is hoping to be selected as the site for a new office building that would house a California State Court of Appeals branch. The redevelopment agency also has some sites where it hopes to build housing and some commercial sites that it "hasn't been able to market" because of the water shortage, she said.

In the residential market, sales of homes in the Ventura region in October climbed 9.8 percent from their September level and rose 7.5 percent from a year ago, according to the California Association of Realtors.

But the association reported the median price of a Ventura region home in October was $233,540, down 2.1 percent from the $238,520 recorded in September and 2.5 percent lower than the $239,620 recorded in October 1990.

The figures indicate a continuation of a stabilizing trend since the zooming market of a few years ago, real estate agents said.

In the late 1980s, buyers lined up to make offers and prices climbed daily. Since then, the number of listings has risen steadily and prices have slowly declined.

Just as the office scene is a tenants' market, the agents say, the residential scene is a buyers' markets and will likely remain so until inventory shrinks and the economy turns around.