SUBMARKET: Rents Fall in Desirable Market as Vacancy Rates Rise

0

Even on the desirable Westside the good times are over.

With companies closing and downsizing, the market was hit in the year’s final quarter with a vacancy rate that rose to 11.1 percent, up from 9.8 percent in the prior quarter, according to Grubb & Ellis Co.

Class A rents fell 26 cents, but rates for Class B space held steady at $3.78 as tenants fled pricier digs for more economical options that still carry the cachet of a Westside address. Now, comes an even more challenging 2009.

In particular, all eyes are on Century City, the area’s largest submarket and a center for financial companies and corporate headquarters. The area saw its vacancy rate spike during the quarter to 9.9 percent as asking rents fell 28 cents to $4.89.

“We haven’t seen the physical impact of the layoffs,” said Amir Araghi, Grubb & Ellis research analyst. “When we do, and when companies that took additional space begin to give it back, vacancy will go up dramatically. It also will put a ton of downward pressure on rates since sublease space goes for 20 to 30 percent less than direct.”

Already hit hard in the fourth quarter was the far smaller Westwood market, where private equity concern Blackstone Group owns a chunk of property after buying Sam Zell’s Equity Office Properties for $23 billion in early 2007 during what in hindsight was the height of the commercial real estate bubble.

Blackstone tried to dramatically raise lease rates, but vacancies shot up nearly three points while asking rents dropped 71 cents to $4.63.



Office Market At a Glance

Inventory: 43.2 million square feet

Under Construction: 783,917 square feet

Class A Asking Rents: $4.53


MAIN EVENTS

– Sky Broadway MVB LLC sold the Holmby Building at 10474 Santa Monica Blvd. in Westwood to L.A.-based Realty Center Management Inc. for $21.5 million. The four-story, 56,601-square-foot property was 98 percent occupied at the time of sale.

– An undisclosed L.A.-based private investor sold the 36,065-square-foot office building at 1762 Westwood Blvd. in Westwood for $11.2 million to another undisclosed investor as part of a 1031 exchange.

– Sony Entertainment’s PlayStation division renewed for 44,751 square feet at 1630 Stewart St. in Santa Monica in a seven-year deal valued at $3.25 per square foot.

– Toymaker Jakks Pacific Inc. of Malibu inked an 18,370-square-foot showroom/creative space in a seven-year deal at 2700 Pennsylvania Ave. in Santa Monica. Financial terms were not disclosed.

– Raleigh Enterprises renewed its 12,000-square-foot space at 100 Wilshire, a 21-story office tower at the corner of Wilshire Boulevard and Ocean Avenue in Santa Monica. Terms were not reported.

– In November, the Los Angeles Planning Commission approved an $800 million expansion of mall developer Westfield’s the New Century mixed-use development in Century City. The project will require Westfield to relocate Bloomingdale’s and raze a 361,000-square-foot office building at 1801 Avenue of the Stars to accommodate a 39-story tower. The building, designed to new energy-efficiency standards, will include 359,000 square feet of office, retail and residential space, and a transit station.

No posts to display