Technology companies putting down roots in the entertainment world helped push the Westside vacancy rate below 10 percent for the first time in years.
Third quarter vacancies in the submarket that includes Santa Monica and Beverly Hills fell to 9.8 percent from 15.3 percent for the like period a year earlier, according to Grubb & Ellis Co.
"New life is being breathed into the Westside markets by synergies between high-tech and entertainment," said Neil Resnick, executive vice president and managing director for Grubb & Ellis.
Web portals, in particular, consider creative and entertainment content a major part of the future, Resnick said. "The advances in broadband are leading to deeper relationships with entertainment firms."
In Santa Monica, vacancy rates fell to 7.6 percent from 7.8 percent in the second quarter and 13.9 percent a year earlier, while asking rents rose 12 cents sequentially to $3.49 a foot, 45 cents higher than rents one year earlier.
Yahoo Inc. nearly doubled its footprint at the former Colorado Center, subleasing 150,000 square feet formerly occupied by Metro-Goldwyn-Meyer Inc. and taking an additional 64,000 square feet in an $80-million deal. This is on top of the 256,000 square feet that the company leased there earlier this year and brings its total footprint to 470,000 square feet, more than 40 percent of the entire property.
Two deals are pending in Beverly Hills. America Online Inc. is negotiating to lease 60,000 square feet at 331 N. Maple Drive and Fox Sports Interactive is looking to lease the 160,000-square-foot building at 407 Maple Drive from new landlord Tishman Speyer Properties LP.
Tishman purchased the property, which has never been occupied, for $71 million from a partnership that includes David Geffen and Dr. Bernard Salick. "At $443.75 per square foot, that's a big number for an empty building," said Mike DeSantis, senior director with Cushman & Wakefield Inc.
Salick also sold the near-empty Columbia Savings & Loan building at 8900 Wilshire Blvd. for $13 million. Global Five Associates paid $401 per square foot for the 32,400-square-foot building.
The tighter market makes it easier for new landlords to command higher rents. Average asking rents for Beverly Hills Class-A buildings reached $2.89 in the third quarter, up from $2.80 in the second quarter and $2.78 a year earlier.
The trend holds for the Westside as a whole, where third-quarter asking rents rose to $2.88 a square foot on Class-A space from $2.68 a year earlier.
To get a sense of how much the market has contracted, year-to-date net absorption topped 2 million square feet.
"Almost all of the absorption is coming from the entertainment-technology-media entities," DeSantis said. "There used to be plenty of space for big users, but not so much anymore."
Westwood's once-lagging market rebounded in the third quarter, as tenants absorbed nearly half the available space. Vacancies fell to 8.6 percent from 20.3 percent in the year-ago third quarter, as new users absorbed nearly 250,000 available square feet.
Most of the activity was at 10960 Wilshire Blvd., where there had been 315,000 square feet on the market.
SK-Earthlink LLC, a joint venture of South Korea's SK Telecom Co. and Earthlink Inc., signed a 50,000-square-foot lease, Sony Corp. took 77,213 square feet, and School Loans Corp. leased 10,200 square feet in an expansion worth $1.6 million.
With space filing up, average Class-A average rates rose to $2.93 a square foot from $2.80 in the second quarter.
The Yahoo deal wasn't the only major transaction in Santa Monica. Edmunds.com, the online auto information company, signed a lease for 70,000 square feet at the Water Garden.
Also at the Water Garden, Greenberg Traurig LLP expanded by 46,868 square feet to more than 100,000 square feet in a six-year, $12-million lease.
The only submarket where asking rents fell was in Century City, where landlords were asking $3.02 per square foot for Class-A space, down from $3.09 in the second quarter.
Still, vacancies fell to 11.5 percent from 13.8 percent in the second quarter and 18.7 percent a year earlier.
Law firm Simpson Thacher & Bartlett LLP renewed 20,568 square feet at 1999 Avenue of the Stars in a 10-year, $9 million deal.
Van Etten Suzumoto & Becket LLP inked a new lease for 50,000 square feet in an 11-year contract at 1800 Century Park East for almost $25 million. The firm will move from its space at the Water Garden in February.
Financial services firm Comerica Inc. closed a 15-year ground-floor deal at 2000 Avenue of the Stars at $32.8 million.
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