HOLLYWOOD: West Hollywood Pulls In Tenants as Hollywood’s Star Dims

0

It was a story of good news and bad news for the Hollywood-West Hollywood office market during the first quarter.

The opening of the Red Building, the third and final phase of the Pacific Design Center, has boosted tenant interest in West Hollywood, helping drive up asking rents.

But neighboring Hollywood continues to be weak, with plenty of vacancies, something the area’s professional, high-tech and media tenants seized upon.

“In the Hollywood market, with all the things that are going on with buildings and tenants downsizing, there’s just a lot of opportunity for growing companies to find attractive deals,” said James Malone, Jones Lang LaSalle senior vice president.

Class A office rates for the overall market shot up to $3.84, a sharp 18-cent increase from the previous quarter, according to Grub & Ellis Co. The vacancy rate rose seven-tenths of a point since the end of the year to 13.9 percent. That was up from 11.8 percent a year earlier, not surprising given that the market gave back 25,459 square feet during the first quarter.

Developer Charles Cohen announced that the 415,000-square-foot final installment of his Pacific Design Center, at the corner of Melrose Avenue and San Vicente Boulevard, could be delivered as early as this summer after some four years of construction.

High-profile tenants such as United Talent Agency, Endemol USA and William Morris Agency reportedly have eyed the Cesar Pelli-designed space for headquarters.

“It’s the impetus for Westside interest,” said Arty Maharajh, senior research analyst at the L.A. office of commercial real estate brokerage Transwestern. “By it coming on line this year, it’s making the institutional investors feel this is the time.”

Other high-profile projects in the submarket include Hudson Pacific Properties’ studio and office complex at 5800 Sunset Blvd., and Pacific Ventures’ eight-story office building at 1601 N. Vine St., which recently received City Council approval.

All this new space, once it comes on line, will benefit Hollywood as the markets around it fill up. For the near term, though, landlords will have to lower their rent expectations.

“In the other markets, (such as) Beverly Hills, there’s going to be less opportunity moving forward. You’ll see those markets firm up,” said Malone. “Hollywood will lag behind. There’s still a lot of opportunity for the right tenant.”

MAIN EVENTS

  • Hudson Pacific Properties Inc. secured a five-year, $92 million loan in February from Wells Fargo Bank for its Sunset Gower + Sunset Bronson media and entertainment campuses at 5800 Sunset Blvd. The loan will help L.A.-based Hudson Pacific finance a 13-story office tower, a five-story production facility and a parking structure on the property.
  • VSM Enterprises LLS purchased a 3,000-square-foot property at 8756 Hollaway Drive in West Hollywood for $1.9 million from the Strangelli Group LLC. The building offers class B office space and live-work units, and will be used by tanning and skin care company Infinity Sun.
  • The former First Federal Bank building at 464 N. Fairfax Ave. in West Hollywood sold from a Federal Deposit Insurance Corp. receivership for $2.8 million to Culver City-based North Fairfax LLC. The 9,233-square-foot, three-story office and retail building is vacant.
  • Pacific Ventures’ $57 million Class A office and retail project at 1601 N. Vine St. received City Council approval in March. The 128,000-square-foot building will be next to a condo complex.
  • Cohen Bros. Realty Co. held a topping-out ceremony to announce the pending completion of its Pacific Design Center. The $165 million Red Building will add 400,000 square feet to the 14-acre, three-building property in West Hollywood.

No posts to display