Entertainment Users Fuel Ultra-Low SFV Vacancy

LOS ANGELES—Entertainment industrial users are migrating to the San Fernando Valley, where industrial vacancy rates are below 1%. The San Fernando Valley is, in many ways, a smaller Inland Empire market, and according to Colliers International EVP John DeGrinis, entertainment users are a large segment of the demand and are helping to push the vacancy rates to all-time lows.

"Some of these users that are located in denser areas like Hollywood and adjacent, where we have older buildings that have been around since the 30s, 40s and 50s, some of the users are recognizing that the buildings need to be a little bit more modern," DeGrinis tells GlobeSt.com. "We have seen a fairly steady transition for users coming from Hollywood and moving into the San Fernando Valley because the buildings are more modern, and number two, there is availability, which often times in Hollywood, you won't find in an industrial building."

Rental rates aren't the driver for this migration. Hollywood has such a lack of industrial product as it has transitioned into a different kind of market, and industrial entertainment users are making their way to the to San Fernando Valley for more modern product. "There is very little product like what we are talking about in Hollywood. Most of Hollywood has been built out into office, so the remaining users that are there are studio only, because those are the only types of users that could justify being in such a high-priced area. It is more about the availability of the type of industrial product available in our market, versus the lack of availability in Hollywood," says DeGrinis.

In an earlier story, GlobeSt.com reported that DeGrinis is leading the leasing efforts of a new state-of-the-art industrial development from Xebec and Cornerstone Real Estate in Sun Valley. The $58 million property broke ground recently, and DeGrinis says that it is already attracting some attention, although an actual lease deal is still early. He said that entertainment users would be a welcome fit for the property, but didn't count out the broad user base in the market. "We love entertainment users. The valley, over the last couple of decades, has attracted a lot of those users. Since 1985 to 1990, we have seen the events industry move out and be back-filled by the entertainment industry. Now, the San Fernando Valley has become the nucleus for the entertainment industry, certainly supplanting Hollywood. Right now, we have a lot of entertainment users, and we certainly expect entertainment users to see the value in our building. But, that is by no means the only pool. One of the advantages of the San Fernando Valley is that we have a diverse labor pool and a diverse industry cluster. There is no shortage of industry clusters that would be interested in this building."