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By BENJAMIN MARK COLE
The Westside remained one of the tightest office markets in town especially for premium areas like Century City and Beverly Hills.
"Tenants are scrambling for an ever-shrinking supply of quality alternatives," said Vincent Pellerito, senior broker with Cushman Realty Corp. in Century City.
Added Gary Weiss, senior managing director with Julien J. Studley Inc. brokerage, "It got tighter in the second quarter. Deals are getting done, and getting done quickly, before rates go up or before they lose the space. Landlords are even playing tenants off against one another."
In Century City, the vacancy rate fell to 8.2 percent in the second quarter, from 8.4 percent in the first quarter, according to Cushman & Wakefield of California.
Little wonder, then, that construction appears to be gearing up. In the second quarter, the L.A. City Council approved construction of Constellation Place a 38-story, 704,000-square-foot high-rise. The project was designed by Johnson Fain Partners which did Fox Plaza in Century City, one of the premier office buildings on the West Coast and is being developed by JMB Realty Corp.
In Brentwood, vacancy rates fell to 10.4 percent in the second quarter from 11 percent in the previous quarter, while in Santa Monica rates fell to 10 percent from 10.2 percent.
In Westwood, the vacancy rate rose from 6 percent to 7.6 percent but that's still one of the lowest rates in the region. West L.A. also notched upward, from 16 percent to 16.2 percent.
Real estate brokers say the West L.A. number is high because it includes the Olympic Boulevard corridor, which is considered less desirable than other Westside addresses.
Not surprisingly, rents are rising. Commanding the highest rents is Fox Plaza in Century City. "Well over $3.50 (square foot per month) and up," said Weiss. Pellerito cited rents at $4.50 a square foot in the tower.
"You know, when there is enough demand, and scarce product, an auction environment is created, and funny things happen at auction," said Stanley Plog, of Reseda-based Plog Research. "Sometimes, it can be a macho thing 'I'm not going to be outbid.' "
Also, with the improving economy, there is more confidence than at any other time in the 1990s. Sensing the optimism, landlords are raising rents. The average asking lease rate in Westwood only a few years ago the site of see-through office buildings reached $2.91, highest of any office district in Los Angeles (although off marginally from the first quarter).
Other high-priced areas include Century City, with an average lease rate of $2.42 in the second quarter, up from $2.33 in the first quarter; and Brentwood, with rates running at $2.33 in the second quarter, virtually unchanged from the first quarter.
City National Bank leased 24,000 square feet at 9701 Wilshire Blvd. in Beverly Hills, while law firm McDermott, Will & Emery took 80,000 square feet at 2049 Century Park East. Law firm Bryan Cave LLP renewed its lease at 120 Broadway Street in Santa Monica for 20,000 square feet, and took 24,000 square feet more.
Though real estate investment trusts pulled in their horns somewhat in the second quarter, there was buying going on. The 405,000-square-foot Westside Towers at 11835-45 West Olympic Blvd. was purchased by Douglas Emmett Co., which also bought the 120,000-square-foot Imperial Bank building at 9777 Wilshire Blvd. in Beverly Hills.
The 186,000-square-foot Wilshire Palisades building, at 1299 Ocean Ave. in Santa Monica, was purchased by Cornerstone Properties. Beverly Hills-based Arden Realty Inc. bought 80 acres of land formerly owned by Howard Hughes' Summa Corp. near the San Diego (405) Freeway, and a 36,000-square-foot office building at 11075 Santa Monica Blvd. "There is buying still, just on a more selective basis," said Victor Coleman, president at Arden.
Coleman said one reason he is buying is that rents probably will go up. "Rents are based on demand, and there is a shortage of space," he said. "Rental rates are going to go higher, as they did in the second quarter."
The rental rate for West Los Angeles, which includes the soft Olympic Corridor, was $1.88 a square foot per month, while the Culver City/Marina area posted an average rate of only $1.79 in the second quarter. Some warn that certain growth industries particularly multimedia might abandon the office buildings of the Westside for warehouse conversions, such as those going on in Culver City.
"They want the more funky buildings. They can't, or don't want to, pay the rent, and they might not like the vertical environment of an office building. That's for the suits," said Weiss, of Julien J. Studley. In the second quarter a "new" phenomenon was also noticed: building cranes.
Meanwhile, construction began on Playa Vista, the 1,083-acre commercial-retail-residential site just south of Marina del Rey. But construction of parts of the project have been halted to determine whether the project complied with laws protecting wetlands.
? The City Council approved Constellation Place, designed by Johnson Fain Partners designer of Fox Plaza at 38 stories and 704,000 square feet in Century City. JMB is the developer.
? Preliminary construction work began on the huge 1,083-acre Playa Vista mixed-use project, although some work was curtailed due to environmental concerns.
? Law firm McDermott, Will & Emery leased 80,000 square feet at 2049 Century Park East
? Apollo Pacifica began construction on the 192,000-square-foot Arboretum Gateway at 2220 Colorado Blvd. in Santa Monica
? Spieker Properties began construction on the 133,830-square-foot Arboretum Courtyard at 2120-2150 Colorado Blvd. in Santa Monica.
? The 405,000-square-foot Westside Towers at 11835-45 West Olympic Blvd. was purchased by Douglas Emmett.
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