REAL ESTATE QUARTERLY - Westside
Brentwood, Beverly Hills Shine; Leasing in Westwood Struggles
By MARGOT CARMICHAEL LESTER
Westside vacancy rates fell in the second quarter and asking rates on Class A office space held steady, perhaps setting the stage for a pickup in activity during the second half of 2004.
Absorption, the amount of space newly occupied less the amount put on the market, remained positive at 98,603 square feet, although the pace of absorption slowed from 216,532 square feet in the first quarter.
"As the economy continues to stabilize and we begin to see job growth, we will see executives more comfortable with making long-term decisions," said Jeff Pion, executive vice president with CB Richard Ellis Group.
Office vacancies during the second quarter were 16.7 percent, compared with 17 percent in the previous three months and 16 percent in the year-ago second quarter, according to Grubb & Ellis Co. While Class A asking rates slipped slightly to $2.68 a square foot from $2.70 in the first quarter, Class B rates rose 4 cents during the same period to $2.35 per square foot.
For now, the Westside's bright spot continues to be Brentwood, where Class A vacancy rates were among the lowest in the submarket. Brentwood's second quarter vacancy rate tightened to 13.5 percent from 13.8 percent in the first quarter, bested only by always-tight Beverly Hills, at 11.9 percent.
Brentwood's lower vacancies haven't yet translated into higher rents, at least in the Class A market. Average asking rents crept down to $2.55 per square foot from $2.58 in the first quarter. But low Class A vacancies helped boost Class B asking rates by 8 cents, to $2.75 in the second quarter from $2.67 in the first.
Pion expects Class A asking rates to follow suit as the economy improves. "Already, some landlords in Brentwood have decreased some of the concessions that they are offering," he said.
Two deals were inked at 12100 Wilshire Blvd.: the law offices of Nadrich & Associates' 4,750-square-foot lease for five years at $700,000; and Quantum Digital Solutions' 16,682-square-foot lease for five years at $2.45 per square foot. Another two deals closed at the World Savings Building (11601 Wilshire Blvd.): a 13,800-square-foot, five-year, $1.8 million lease by Hinshaw & Culbertson LLP; and a 6,846-square-foot, 10-year, $1.9 million deal by Champion Realty.
The Santa Monica submarket also fared well. Vacancy dipped to 16.3 percent in the second quarter from 17.3 percent in the first, while Class A asking rates dipped 2 cents to $3.12 and Class B rose 12 cents, to $2.57. Net absorption almost doubled from the first quarter to 71,555 square feet.
"Rates will continue to soften until landlords really feel that there is an increase in tenant demand," Pion said. "Right now, there is just a lot of musical chairs going on in the market."
One signal that job growth is in the offing: Guthy-Renker expanded its take at Santa Monica Business Park to 8,200 square feet for a total consideration of $850,000. At the same location, Tennenbaum Capital Partners LLC took 15,850 square feet for undisclosed terms.
Santa Monica investment deals included SM Broadway Associates Inc.'s sale of the 113,000-square-foot property at 520 Broadway to Palisades Associates Inc. for $31.6 million. Elsewhere, the 42,050-square-foot office building at 604 Arizona Ave. was sold to a buyer represented by accountant, Sid Tessler, by DT Santa Monica for $12 million.
Still on the block as of last week was Tishman Speyer Properties Inc.'s 1.1 million-square-foot Colorado Center, although Tishman is in exclusive negotiations to sell the center to a partnership of Equity Office Properties Trust and TIAA-CREF for $460 million.
Westwood continues to be among the poorest performers. Class A asking rates dropped 3 cents in the second quarter to $2.79. While the vacancy rate fell to 22.3 percent from 22.9 percent in the first quarter, it remains the highest in the submarket.
One building, 10960 Wilshire Blvd., has struggled with low occupancy since Saban Entertainment vacated 90,000 square feet in 2003. An expected deal to bring in the William Morris Agency, fell through, Robinson said.
-Quantum Digital Solutions leased 16,682 square feet for five years at $2.45 per square foot at 12100 Wilshire Blvd. in Brentwood.
-Hinshaw & Culbertson LLP let 13,800 square feet at the World Savings Building (11601 Wilshire Blvd.) in a five-year, $1.8 million transaction.
-Guthy-Renker expanded its take at Santa Monica Business Park to 8,200 square feet for a total of $850,000.
-SM Broadway Associates Inc. sold 520 Broadway in Santa Monica to Palisades Associates Inc. for $31.6 million.
-Western Sciences International leased 10,678 square feet at 1251 Westwood Blvd. in a seven-year, $1.6 million deal.
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