By all measures, the Hollywood office market fared worse during the third quarter than the second, but landlords aren’t complaining.
After nearing vacancies of 30 percent a year ago, the market has spent all of 2012 in better shape, ending the July-September period with 22.1 percent of its office square footage empty, according to Jones Lang LaSalle Inc.
Still, the market’s vacancy rate rose 0.6 percentage points during the third quarter and its net absorption fell into the red for the first time this year as the submarket gave back 13,199 square feet.
“Leasing has definitely slowed down a little bit in the last quarter. Everything goes very quiet in August as people are in vacation mode and it hasn’t come back very strongly since then,” said John Tronson, a principal in Los Angeles with Avison Young Inc. “But we’ve seen a lot more activity on the sales side over the past few quarters.”
Carle Pierose, a partner with Santa Monica’s Industry Partners, agreed, explaining that many companies that might have previously looked to rent now have an eye toward buying space.
“Interest rates are so low and everyone’s business manager is telling them to go buy something and there’s just not a lot on the market,” Pierose said. “It used to be you could find these cool little buildings, but we’re having a harder time finding them. It’s going to be good for Hollywood when we get some new projects delivered.”
In one recent owner-user deal, Musicians Institute College of Contemporary Music purchased two buildings totaling 18,662 square feet at 1518 and 1522 N. Highland Ave. for $6.2 million. The school had already occupied one of the buildings as a tenant.
Class A asking rents in Hollywood fell 11 cents during the third quarter to $2.78 per square foot, a nickel off from the year-ago period. Landlords might not be raising rents, but they certainly don’t feel they need to offer as many incentives these days, Tronson said.
“You’re not seeing as much free rent, broker bonuses, moving allowances,” he said. “You’re not seeing all that gimmick stuff that was happening a year or two ago to try to attract tenants to what was an otherwise bleak market.”
Main Events
West L.A.-based JMS Ventures Inc. purchased a 24,000-square-foot building at 6735 Selma Ave. from developer Bob Champion’s Selma Highland Venture for $8.12 million. The building is fully occupied by Woodland Hills-based film equipment maker Panavision, which has a lease through 2016.
Musicians Institute College of Contemporary Music purchased two buildings totaling 18,662 square feet for $6.2 million. The deal included an office building at 1518 N. Highland Ave. as well as a retail building at 1522 N. Highland. The seller was a family trust. The school, which now owns 10 properties in Hollywood, already occupied the office building as a tenant.
Real estate investment firm Kilroy Realty Corp. completed its $76 million purchase the 22-story Sunset Media Tower at 6255 W. Sunset Blvd. The previous owner, USA Sunset Media LLC, bought the property for $82.5 million in 2005.
At the retail component of luxury apartment building Jefferson Hollywood, fitness center CrossFit leased 3,695 square feet for five-and-a-half years in a deal worth approximately $600,000, while restaurant Tinhorn Flats Saloon & Grill signed a 10-year lease valued at $2.38 million for 4,800 square feet. The building is located at 1724 N. Highland Ave.
Real estate investment firm CIM Group announced it has fully leased its 82,000-square-foot, six-story office building at 7083 Hollywood Blvd. now that concert promoter Live Nation Entertainment Inc. has taken more space, expanding to two floors. Shared-office services provider WeWork has two-and-a-half floors in the building. CIM purchased the property in 2005 for $19.95 million and has since renovated it.
