Nearly a year into the pandemic, Santa Clarita Valley businesses are continuing to adapt to the shift in the economic environment, including those in the commercial real estate market.
Amid the ups and downs in the COVID-19 economy, the SCV commercial real estate market has seen several significant multimillion-dollar transactions, a sign that while there may have been somewhat of a downturn, this local market remains strong due to a number of factors.
“Though it’s been a difficult year for a lot of things, we’re still seeing a lot of good momentum on the commercial side here in Santa Clarita,” said Jason Crawford, economic development manager for the city of Santa Clarita.
Spectrum Commercial Real Estate Inc. has seen this momentum firsthand, with Yair Haimoff, Spectrum’s executive managing director, agreeing that the market is, indeed, recovering.
“Between March and May, it was very, very slow, but after May, our business picked up quite a bit,” he said, adding that the pent-up demand and stalled deals certainly kept them busy through the end of the year.
Even so, while the commercial market as a whole went back up, it was due in large only to certain sectors, as some industries are still suffering the effects of the pandemic-induced shutdowns, Haimoff explained.
Crawford agreed, adding, “It is a combination of some businesses that are still doing well and some businesses that are having the hardest time they’ve ever had.”
An unchanged industrial boom
“Industrial had a very strong year,” said Holly Schroeder, CEO and president of the SCV Economic Development Corp., adding the industrial sector has seen much activity in recent years due not only to new developments, but also, in part, due to industry shifts, such as the move to e-commerce, which has brought big-name companies, like Amazon, to the SCV, or the growing demands of the film industry.
Filming activity has completely rebounded since its total shutdown last year, Crawford and Schroeder agreed. This, combined with the influx of streaming services, has brought forth a demand for soundstage space, as well as other film support-type companies that work with productions.
In addition, Haimoff has seen a lot of companies show interest in leasing additional warehouse space to store their inventory in case there’s another shutdown that affects supply chains.
“The only problem right now is inventory; so, now there’s interest, but there’s lack of inventory of industrial properties,” Haimoff added.
It’s for these reasons that Haimoff believes the industrial market is the one driving the market now and essentially picking up the slack for all the other industries who are suffering.
The unknowns in the retail industry
Experts agree that it’s been the retail industry that’s taken the biggest hit this past year, and it remains rocky due to the current stay-at-home order.
“I think there’s a bunch of unknowns about the future of retail,” Schroeder said. “This is in part corollary to what we’re seeing in industrial, where people have shifted to online shopping so e-commerce has been some of the biggest new tenants coming in.”
This shift is sure to have a lasting impact, though Schroeder doesn’t expect to fully know what the long-term fallout will be until some of the health restrictions on this sector are lifted.
Restaurants are some of those most impacted by the shutdown, with many suffering without in-person dining. Even so, others who’ve either been successful at offering take out or have the benefit of having drive thrus are continuing to prosper.
“A lot of family entertainment businesses, like Scooter’s Jungle or Pump It Up, are closed, and they’re probably not going to come back … and are going to be the ones that open up last,” Haimoff said.
However, because those spaces were often operating out of warehouses, those buildings are now simply expected to be used as warehouse space instead.
Taking advantage of retail opportunities
Others, like the consortium of developers led by Synergize Ventures from Danville, Lotus Equity Partners from New York and Ambassador Equities from Cleveland, which recently purchased the Sierra Crest Center, located at 27125 Sierra Highway in Canyon Country, hope to continue to revitalize retail centers in the SCV, according to Joseph Huang, managing director for the group.
“We’re a group of developers that look for distressed properties like this one,” Huang said. “We like to work in areas that are growing and certainly Santa Clarita is a great boomtown (and) pro-business, which we like.”
Huang, who’s from L.A. originally, recalls passing through the SCV and wondering about the area’s promise.
“When this deal fell into our lap, we saw a lot of potential,” he added. “It’s very well-situated off (Highway) 14, has a lot of car traffic and a lot of good foot traffic, as well, so I think there’s a lot of catalyst to what’s going on in Santa Clarita with population growth and all the master planning and development taking place.”
In addition to some of the much-needed renovations and modernizing the center’s facade, Huang wants to work with tenants, both present and future, to help them thrive.
“We’re trying to figure out who really wants to stay, who wants to align with our strategy and then working to find other tenants that want to be part of this center … maybe with a better synergy to make it a little bit more family friendly, so that it would blend in better to what Santa Clarita has in mind,” he added.
The impact of the home office
As many continue working from home, it’s to be expected that the office-space industry has seen some change, with the SCVEDC’s economist projecting a current vacancy rate of around 11%.
While many were worried about this sector as the year went on — many still are — analysts expect most companies are likely to end up in some sort of hybrid model, as they try to figure out a good balance, Schroeder said.
“The synergies and the sort of serendipity opportunities that arise (in the office) are very real, and I think companies want to get back to having some of that happen,” she added. “At the same time, they’ve recognized some of the benefits of working from home, in terms of people’s ability to sometimes be more focused perhaps or some people not having to commute.”
The hotel industry’s saving grace
“They were hit incredibly hard, and there was a while in spring of last year where there was no activity out of hotels, but our hotels have started bouncing back,” Crawford said, adding that hotel occupancy numbers bottomed out in April 2020, as they dropped to 21.3%, but slowly started to come back since to 62.4% in November. “Our latest occupancy numbers are better than other areas, so we’re pretty happy about that.”
For the hotel industry, who’ve seen travel rates drop dramatically last year in the midst of stay-at-home orders, it’s been the film industry that’s allowed them to continue prospering.
“We have seen some interest from film productions (who are) creating their own bubble, like they talk about with sports teams where they rented out the entirety of a hotel for a couple of weeks … so the fact that we have proximity to Los Angeles, and we have a strong film sector here, that’s a benefit that we have here in Santa Clarita that it doesn’t exist in other parts of the country,” Schroeder said, with Crawford adding that a show rented out the Hyatt for a couple of weeks to house their crew.