The Westside continued its recovery from the dot-com implosion as vacancy rates fell to 14.6 percent in the October-December quarter from 17 percent for the like period a year earlier.
Driven largely by a rebounding Santa Monica submarket, where vacancies dipped below 13 percent, the Westside's recovering health was marked by a modest bounce in Class-A asking rents.
For the year, the submarket had 1,500 square feet of positive net absorption, fueled by renewals and expansions. The year's final quarter saw more than 191,000 square feet taken off the market, thrusting the Westside into positive territory, according to Grubb & Ellis Co.
Vacancy rates in Santa Monica experienced a year-long drop, falling to 12.5 percent in the fourth quarter from 17.3 percent in the January-March period.
Lease velocity was driven by large blocks of contiguous space and an abundance of smaller, creative space.
One company taking advantage was global advertising and public relations agency WPP Group PLC, which leased 73,000 square feet at the Water Garden in a 10-year deal estimated to be worth around $26 million.
The busiest building in Santa Monica was 3130 Wilshire Blvd., where four leases were inked. Conkle & Olesten leased 6,818 square feet in a 5-year deal worth $826,569, and Plan Ahead took 3,989 square feet in a 6-year, $612,950 deal.
The threat of lower vacancies pushed asking rents up to $3.14 per square foot in the fourth quarter from $3.04 per square foot in the previous three months. "Whether they'll get those rates is another question," said Mike DeSantis, senior director of Cushman & Wakefield Inc. "There's still good space available in Brentwood and Westwood, and more potentially on the way in Century City."
Still, rising rents and declining vacancies prompted at least one investor to act. Maguire Properties Inc. entered into an agreement to acquire the 12-acre Lantana Entertainment Media Campus for $136.8 million from Hines U.S. Office Development Fund. The project is 93 percent leased.
Investors were more active in Beverly Hills' Golden Triangle.
Broadway Partners made its second purchase in the submarket this year, acquiring the Wilshire Rodeo office and retail complex at 9560 Wilshire Blvd. for an estimated $150 million. Basslamp Ventures acquired the building at 3000 S. Robertson Blvd. from $20.23 million from Atrium Properties LLC.
Lease velocity was slow, despite large spaces available on Maple Drive that buoyed vacancy and kept net absorption negative for four of the last five quarters.
Overall, vacancies were in the 13 percent range for most of the year. Asking rents for Class-A space changed little in the fourth quarter, ticking up to $2.79 per square foot from $2.78 in the prior period.
Westwood and Century City lagged, keeping the Westside from looking even better.
"The toughest market was Westwood, with 315,000 square feet available at 10960 Wilshire Blvd. keeping things soft there," said Stan Gerlach Jr., senior vice president at CB Richard Ellis. The former Saban Capital Group space has been vacant since the fourth quarter of 2002.
Westwood recorded the highest vacancy rate on the Westside, closing the final quarter at 21 percent, down from 24 percent in the like period a year ago. Average asking rents for Class-A space were $2.79 per square foot in the year's final quarter, flat from the previous period.
Only two notable leases were signed in the final quarter: Entertainment Brokers International inked a 19,000-square-foot expansion and renewal at 10940 Wilshire Blvd. for undisclosed terms. Radar Pictures Inc. renewed its 15,000-square-foot lease at 10900 Wilshire Blvd. for five years at $2.8 million.
Vacancies dipped slightly, to 17.2 percent in the year's final three months, assuring the submarket remained at historically high levels all year. And while large blocks of space available in key buildings might make this a tenants' market, landlords held to average asking rents of $3.07, second only to the far healthier Santa Monica submarket.
For reprint and licensing requests for this article, CLICK HERE.