The Westside scored one of the bang-up deals of the third quarter.
William Morris Agency sold its three-building Beverly Hills headquarters on Rodeo Drive for a whopping $143 million.
“This deal shows that even in tough economic times, people will recognize and pay for unsurpassed location,” said Neil Resnick, executive vice president of transaction services at Grubb & Ellis Co., who has represented the agency for 20 years.
However, the celebration isn’t expected to last long.
The Westside is bracing for a rough ride with about one-quarter of its tenant base reeling from the mortgage meltdown and the commercial credit crisis.
Century City likely will be hardest hit. The area has been one of the county’s hottest, with its performance peaking in the third quarter as the vacancy rate fell nearly 1 half-point from midyear to 8.1 percent, according to Grubb & Ellis Co.
However, one troubled company alone American International Group has offices there for two major subsidiaries: International Lease Finance Corp. and AIG SunAmerica. There were already telltale signs of trouble in the third quarter, as asking rents fell 4 cents to $5.17 since midyear.
“The hottest and best markets are going to take a major hit with a ton of sublease space coming on the market in the fourth quarter and 2009,” says Amir Araghi, a Grubb & Ellis research analyst.
Overall, the Westside vacancy rate hit 9.8 percent, up nearly 1 point since midyear. The average asking rate was $4.79 per square foot for Class A buildings, down sharply from $4.93 from midyear.
“As landlords take inventory of the financial debacle and its implications, the market pendulum will continue to swing further in favor of tenants,” said Sean Westgate, vice president at Jones Lang LaSalle. “Large landlords whose rates shot up last year will become more aggressive about offering favorable concessions to tenants.”
One possible bright spot: Culver City and, especially, the new Playa del Rey development are attracting interest from multiple prospective tenants, Westgate said.
MAIN EVENT
– Dallas-based Lincoln Property Co. and Cape Horn Group of Chile acquired three office buildings from the William Morris Agency for $143 million. The package included the 70,842-square-foot building at 150 S. Rodeo Drive, and two buildings totaling 111,807 square feet at 150 and 151 S. El Camino Drive.
– Chicago-based Transwestern Investment Co. spent $121 million to acquire two Class A office buildings at 400 and 600 Corporate Pointe in Culver City from Arden Realty, a unit of General Electric Co. The buildings, totaling 440,000 square feet, were 93 percent occupied at the time of sale; the largest tenant was Sony Pictures with 97,000 square feet.
– Local firm Real Estate Dynamics purchased the 15,412-square-foot office building at 3916 Sepulveda Blvd. in Culver City for $4.8 million. The building was 80 percent leased, but will be vacated. The seller was not disclosed.
– PriceGrabber.com, the comparison-shopping site, sublet 45,059 square feet of space formerly held by BAE Systems at 5140-5150 W. Goldleaf Circle in Culver City. Terms of the expansion and relocation from 10940 Wilshire Blvd. were not disclosed.
– Reznick Group PC, a Bethesda, Md.-based accounting firm, inked a lease for 17,640 square feet at 1888 Century Park East in Century City. The 84-month lease is valued at around $12 million.
– TV software company Zillion TV signed two leases totaling 13,000 square feet at 1522-24 Second St. in Santa Monica. The three-year deal for 6,859 square feet is worth about $1.2 million; a two-year lease for 6,307 square feet was valued at $700,000.
Office Market At a Glance
Inventory: 43.2 million square feet
Under Construction: 460,000 square feet
Class A Asking Rents: $4.79
