Now, here's a commercial real estate landlord-tenant match made in heaven or haven, as the case may be.
Financial Indemnity Co., a "non-standard" (i.e., high-risk) automobile insurance specialist, plans to move its corporate headquarters across the San Fernando Valley from the increasingly pricey Burbank Media District entertainment haven to the less costly Warner Center insurance haven.
In the wake of the media-entertainment field's growth in recent years, Class A office buildings in and around the Media District boast a collective vacancy rate below 2 percent. Accordingly, annual lease rates there have jumped from about $22 per square foot three years ago to $30-plus on recent deals.
Financial Indemnity is currently located at Walt Disney Co.'s Disney Channel building, 3800 W. Alameda Ave. Disney has taken over offices as tenants' leases have expired and occasionally negotiated early lease terminations, as is the case here.
At the other end of the Valley, the vacancy rate in Warner Center is close to 10 percent which is actually a pretty healthy rate but annual rents at highrises there are typically in the low-$20s. Parking costs are also 25 percent or more below comparable properties in Burbank.
Nevertheless, the 25-story Warner Center Plaza III tower the tallest building within the district's primary "highrise row" along Oxnard Street sat almost entirely vacant for several years after its early-1990s completion.
It was still hardly 20 percent leased before Financial Indemnity signed a 10-year lease for about 55,000 square feet.
The lease transaction valued at approximately $14 million will bring Financial Indemnity's headquarters to Plaza III's never-occupied 17th and 18 floors.
It likewise illustrates the lower-cost environment Warner Center has always aimed to offer large institutional tenants. It's no coincidence that insurers such as 20th Century, WellPoint/Blue Cross, Health Net/HSI, CareAmerica, Prudential, CNA and Zenith National make their homes in Warner Center.
Financial Indemnity was represented by Grubb & Ellis Co.; and CB Commercial Real Estate Group handled property owner AH Warner Center Properties LLC.
Center West returns
"The Westside market is getting very strong," says Kam Hekmat, developer of the luxurious Center West office highrise along the Westwood skyline.
At least the market has gotten strong enough to get Hekmat back into the office leasing marketplace after quite a sabbatical.
Hekmat, who opted not to compete aggressively as Westwood and the rest of the Westside suffered through the early-1990s rental slump, has accordingly been the subject of much discussion among the Westside commercial real estate community in recent years.
After Kaufman & Broad Home Corp. moved from Center West across Wilshire Boulevard about two years ago to get major signage rights and "tenant's-market" rents neither of which Hekmat was willing to offer the developer was sitting on some 120,000 vacant square feet.
That's 40 percent of the space at the 23-story tower Hekmat completed in 1990 at 10877 Wilshire after a long fight with local residents over the development project's size and scope.
Hekmat still hasn't offered a tenant building-top signage. And he's still not inclined to accept the recessionary rent levels tenants were able to command from the local competition not all that long ago.
So can we take the rash of recent Center West relocation leasing activity as the latest sign that the Westside is movin' on up?
Hekmat said market rents tied to five-year leases for the better Westwood office space are now running from the "mid $2s to just under $3 per square foot monthly. That translates to the low $30s per foot annually up perhaps 40 percent over the worst of times three or four years ago.
That's a rate Hekmat can live with, and he's made several relocation deals over the last few months reducing Center West's vacancy rate to about 15 percent once a pending lease (see below) becomes finalized.
CB Commercial's latest statistics peg the 2.76 million-square-foot Westwood submarket's overall vacancy rate at just over 9 percent with just 175,000 square feet of Class A space vacant at year-end.
Most recently, Merrill Lynch & Co.'s investment banking division is moving across Wilshire from Murdock Plaza, taking the entire 15,500-square-foot 19th floor. Beitler Commercial Realty Services' represented the tenant in that 10-year lease transaction.
Van Kasper & Co.'s investment banking group recently moved into 10,500 square feet at Center West, relocating from Brentwood Square in Brentwood. Western Holdings negotiated that 10-year deal on the tenant's behalf.
A Westside-based communications company, which Hekmat declined to identify, is in final negotiations to take the entire 18th floor.
The Center West team also just persuaded Ceridian Inc./Arbitron to relocate from the Miracle Mile district into 6,000 square feet, and Brown & Wood LLP to move from Murdock into 2,000.
Hekmat says some additional significant announcements are forthcoming.
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