Large Players Soak Up Space Leaving Small Bites for Others
By MATT MYERHOFF
Despite several large deals that could help boost rates, vacancy levels in Hollywood rose slightly during the second quarter.
For the April-June period, the vacancy rate increased to 19.8 percent from 19 percent in the first quarter and 23 percent for the like period a year earlier, according to Grubb & Ellis Co.
Meanwhile, the average asking rate for Hollywood and West Hollywood Class-A office space was $2.34 a square foot, 3 cents lower than the first quarter and 6 cents below year-earlier levels.
But there was considerable activity in the market during the April-June period and those numbers could change.
Signing a 10-year lease worth about $15 million in June, Nielsen Entertainment snatched up 68,000 square feet on four floors of the 308,000-square-foot building at 6255 Sunset Blvd. The Community Redevelopment Agency of Los Angeles will loan Nielsen $250,000 for tenant improvements and give a $50,000 grant for signage, pending City Council approval.
Gemstar-TV Guide International Inc. leased 60,000 square feet on four floors at 6922 Hollywood Blvd., a building owned by CIM Group Inc. It was renamed TV Guide Hollywood Center when the firm transplanted its corporate offices there from Pasadena in June.
Los Angeles-based CIM continued to try and close on its purchase of the 20-story Sunset/Vine Tower on the southeast corner of Sunset Boulevard and Vine Street, which has stood vacant and scrawled with graffiti since a 2001 fire.
Taking advantage of a recent extension of L.A.'s adaptive re-use ordinance to Hollywood, CIM plans to break ground by year end on up to 100 residential units in the tower and a ground-floor restaurant and entertainment component. It will include a Hooters Restaurant and a Coffee Bean & Tea Leaf in an adjacent building, CIM Senior Vice President of Development John Given told the Business Journal earlier in the year.
John Tronson, a principal with Ramsey-Shilling Commercial Real Estate Services, believes that the Nielsen, Gemstar-TV Guide and Sunset/Vine Tower deals signal a coming rise in rates.
In such a small market, the deals are having a dramatic impact, Tronson said. "They account for about 10 percent of the total space available," he said.
Given the smaller size of office spaces to start with, subleasing activity in the Hollywood area is limited to smaller deals.
Nicole Films sublet 10,000 square feet in the building owned by Snyder Family Trust at 935 N. Highland Ave. to J.F. Chen Antiques at about $1.20 per square foot, according to Ramsey-Shilling, which represented both parties.
The price was well below going rates for Class-B office space in Hollywood, which is generally found in single-tenant warehouse style buildings occupied by creative companies. Second quarter Class-B space rose a penny from the first quarter, to $2.10 per square foot, and remains 9 cents below the year-ago period.
"Businesses that go to Hollywood are smaller users who can go wherever they want and are very price conscious," said Paul Stockwell, a principal at Julien J. Studley Inc. Post-production companies take up much of the space, as the location is equidistant from all the big studios, he said.
After a first quarter when absorption the amount of space newly leased minus vacated space reached 120,677 square feet, the figure reversed in the second quarter to a negative 33,185 square feet.
Deals such as Gemstar's and the purchase by the American Musical and Dramatic Academy, however, will likely have a positive impact on the rate in the third quarter.
The New York-based academy purchased four buildings at 6301 Yucca St. near Vine Street from De Pietro Family Trust for an estimated $9 million. The academy's new West Coast campus will include 50,000 square feet of improvements on two acres, including 14 apartments to be used as student housing. There is also a landmark building designed by H.L. Gogerty, who also designed the Palace Theater.
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