By REBECCA KUZINS

Contributing Reporter

At the risk of sounding monotonous, it was another hot quarter in the Westside.

Vacancy rates continued to decline, a familiar story in what has become L.A.'s strongest business district, and development activity continued apace.

The area's vacancy rate fell to 9.0 percent, the lowest level in two years and down from 9.3 percent in the third quarter, according to Cushman & Wakefield Inc. Rents held steady from the third quarter, averaging $2.39 per square foot per month. However, rents of $3 to $4 were being quoted at prestigious addresses in Beverly Hills, Century City and Santa Monica.

West Los Angeles was the most active submarket in the fourth quarter, with its vacancy rate plummeting to 7.6 percent from 12.7 percent in the previous three months. The building at 11444 W. Olympic was brought to full occupancy when more than 72,000 square feet was leased to Canon Communications and Psomas & Associates.

Another big lease involved cable giant Tele-Communications Inc., which signed a 10-year deal for the 78,000-square-foot building at 12312 W. Olympic Blvd. to house its national digital television division. The building was recently renovated by owner Kilroy Realty Corp., which is expected to break ground this quarter on an adjacent four-story, 150,000-square foot building.

Office space is also at a premium in Westwood (7.6 percent vacancy) and Century City (7.8 percent). Beverly Hills and Brentwood had more space available at the end of the fourth quarter than at the end of the third, but still posted strong vacancy rates of 9.6 and 9.8, respectively.

While the vacancy rate in Marina del Rey/Culver City was 9.7 percent, unchanged from the third quarter, that submarket had major news: After lengthy negotiations, DreamWorks SKG in November signed a definitive agreement to build its headquarters and studio on 47 acres at the Playa Vista project south of Marina del Rey. DreamWorks will be the anchor tenant for The Campus at Playa Vista, a 114-acre site housing entertainment, media and technology companies.

In other development news, groundbreaking for a 10-story, 250,000-square-foot office building is scheduled for the first quarter at Howard Hughes Center in Westchester. Michael Pollack of Arden Realty Inc., one of the center's partners, said developers plan to add 1.3 million square feet of office space at the site.

The largest volume of construction is occurring in Santa Monica, where the vacancy rate fell to 9.2 percent, the lowest level all year. The 2700 Colorado Building is one of the city's hottest properties; 115,000 square feet in the building was leased to several tenants in December, including the J. Paul Getty Trust (40,000 square feet), Microsoft Corp. (25,000) and Pearson TV (20,000).

Water Garden I, at 2425 Olympic Blvd. and 1620 26th St., was brought up to 90 percent occupancy in the fourth quarter with leases for more than 50,000 square feet.

Water Garden II, another two buildings containing 600,000 square feet, has been under construction since August at 1601 Cloverfield Blvd. and 2450 Colorado Ave. Scott Chalmers, who is overseeing leasing, said negotiations are underway with law and financial firms and entertainment companies for about 400,000 square feet, at an asking price of $3.25 a square foot.

The same rate is being quoted at 2500 Colorado Blvd., where Arboretum Gateway, a 200,000-square-foot, six-story building, has been under construction since March. William Hammerstein, managing general partner for the project, said he is "very close" to leasing 110,000 square feet to one tenant, but would not confirm reports that the tenant is Symantec Corp., a Cupertino-based software company.

Arboretum Courtyard, at 2140 and 2160 Colorado Blvd., is quoting rental rates of $2.85 to $3.05, according to Rick Newman of Lowe Enterprises, the property's developer. Construction of the two four-story buildings, containing a total of 133,000 square feet, is due to be completed in April.

Some brokers maintain that the large volume of office construction might glut the Westside market and drive down rental rates. Gary Weiss, managing director with real estate brokerage Julian J. Studley, predicted that "a lot of companies will be moving around" in 1999, freeing up space and forcing landlords to lower rents.

As an example, he cited Candle Corp., a software maker that is relocating to El Segundo this spring and vacating the 150,000 square feet it now occupies at Water Garden I. "When they leave, that space will be in direct competition with Water Garden II," Weiss said.

But Lisa St. James, leasing agent for Water Garden I, said Candle's lease runs through 2002, so "we will have a cash stream until then." Only 10,500 of the project's 660,000 square feet comes up for renewal between 1999 and 2001, and St. James said there will be enough time to lease this space before Arboretum Gateway and Water Garden II are completed.

Stan Gerlach, senior vice president at CB Richard Ellis, agreed that Water Garden II and Arboretum Gateway will "make very little difference" to the Westside market. "Everything that's under construction in the next two years will only add 3 percent, so you'll have a 12 percent vacancy rate, which is still favorable to landlords. The Westside market is still solid and demand will continue to be strong."

Major Events

? DreamWorks SKG signed a definitive agreement to build its headquarters and studio at Playa Vista.

? TCI leased a 78,000-square-foot building at 12312 W. Olympic Blvd.

? More than 115,000 square feet of space was leased at 2700 Colorado Blvd. in Santa Monica, including 40,000 square feet to J. Paul Getty Trust and 25,000 to Microsoft.

? Canon Communications leased 42,300 square feet and Psomas & Associates leased 30,000 square feet at 11444 W. Olympic Blvd.

? Water Garden I leased more than 50,000 square feet at 2425 Olympic Blvd. and 1620 26th St. in Santa Monica to Telemundo, Hollywood Online and other tenants.

? Goldman Sachs leased two floors, or about 40,000 square feet, in Fox Plaza, 2121 Avenue of the Stars.

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