WESTSIDE: Interest From East Coast Investors Places Space at Premium

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The new year started off with a bang on the Westside, with average asking rates for top-tier space up nearly a third from a year ago, and vacancies holding steady at around 8 percent.

Private equity investments in real estate companies were being cited as a key reason for the rise in rents.

“The major contributor to the increase in asking rates is the purchase of large portfolios in L.A. and West L.A. by large East Coast companies like Blackstone (Group),” said Neil Resnick, executive vice president of Grubb & Ellis’ Tenant Advisory Group.

“They believe that asking rates for L.A. office space are way below where they should when comparing it to other major markets like New York, London, Hong Kong, etc. So they skyrocketed the rents in order to bring L.A. office rents up to par with those markets.”

The largest year-over-year increases in asking rates were charted in Brentwood (36.9 percent), Century City (40.3 percent) and Westwood (45.2 percent), according to Grubb & Ellis Co. However, it’s not at all clear that the increases will continue given the credit crisis and other economic woes.

The asking-rate situation is of particular interest to developers and investors with projects planned or coming out of the ground, and landlords who recently acquired buildings.

“Even if rents slide by 15 percent, they increased by 100 percent in the last 18 months. So unless you just bought the building, you’re probably in the money in a big way and will elect to do a deal,” said Peter Best, managing director with Jones Lang LaSalle.



Office Market At a Glance

Inventory: 43 million square feet

Under Construction: 591,159 square feet

Class A Asking Rents: $4.93



MAIN EVENTS

– Angelo Gordon & Co. and Cambra Real Estate purchased the 92,486-square-foot Class A building at 10780 Santa Monica Blvd. in Westwood from Arden Realty for $33 million. The building is at the intersection of Santa Monica Boulevard and Malcolm Avenue.

– AZ Wellesley Plaza LLC, an Orange County partnership, purchased the 82,258-square-foot Wellesley Plaza building at 12304 Santa Monica Blvd. for $28.9 million from Westside-based Santa Monica-Wellesley. The building was 98 percent full with tenants reportedly paying about half the going rate for Santa Monica space.

– Local REIT Douglas Emmett Inc. acquired 1.4 million square feet of office space on the Westside and San Fernando Valley from Arden Realty Inc. for $610 million, including 2001 Wilshire Blvd. in Santa Monica, and 9100 Wilshire Blvd. and 8383 Wilshire Blvd., both in Beverly Hills.

– Jim House of House & Robertson Architects Inc. acquired 10125 W. Washington Blvd. in Culver City from Sony Pictures Properties Inc. for $4.39 million. The former production and executive office space will become the architectural firm’s headquarters. It will relocate from 6010 Wilshire Blvd. where it leased space.

– Legacy Partners purchased the vacant LEED Gold-certified office building at 800 Corporate Pointe in Culver City for $99 million from Symantec Corp. The 239,274-square-foot, four-story building was recently completed and is part of Symantec’s two-building Southern California campus.

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