Renaissance Fails to Include Office Market
By DEBORAH BELGUM
Hollywood may be going through a retail and entertainment renaissance, but its commercial office market has not.
Several businesses either downsized or closed their doors during the fourth quarter just as the area's largest retail project in years, Hollywood & Highland, came on line. Also, a handful of dot-com companies bit the dust, causing the office market vacancy rate in Hollywood and West Hollywood to hover around 18 percent during the fourth quarter, compared with 11 percent for the like period one year ago, according to Grubb & Ellis Co.
Asking rates for Class A office space dipped to $2.50 a square foot in the fourth quarter, down five cents from a year ago.
"It was a very ugly quarter," said Rob Langer, a managing director with Meringoff Equities.
Langer remembers receiving word one day last November that Propaganda Films was suddenly shutting down and moving out of its 30,000-square-foot building even though the company only had been there for 13 months and had almost nine more years to go on its lease.
Then his company, which is the landlord for the CNN Building on Sunset Boulevard and Vine Avenue, took another hit. Priority Records, a subsidiary of Capitol/EMI, moved out of the two floors it had occupied. Then another two dot-com companies housed in the CNN Building went bankrupt, giving back 7,500 square feet of office space.
David Lachoff, senior vice president with Grubb & Ellis, said the Sunset Media Tower at 6255 Sunset Blvd. has nearly a 70 percent vacancy rate.
"Hollywood still has some stigmas about it," he explained, noting that the on and off-ramps to the Hollywood Freeway are difficult to negotiate and some people believe the area is still unsafe.
But brokers and developers believe that things will get better as more retail and entertaiment projects come on line. "Hollywood & Highland will help," Lachoff said.
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