Talk about too much of a good thing. Steadily sinking vacancy rates and historically high rents are putting the brakes on office leasing in Century City, Santa Monica, Culver City and Brentwood.
Vacancies dipped to 7.3 percent at mid-year, down from 16.4 percent a year ago. At the same time, average asking prices for Class A and B space rose with the increased demand, according to Grubb & Ellis Co .
"Total leasing is slowing down on the Westside due to lack of inventory," observes David Wilson, president of Lee & Associates West Los Angeles . "With no expansion space and no cheap deals why move in this environment?"
Rates for premier space rose 13 cents on the quarter to $3.18 per square foot, up from $2.80 a year ago. Class B space increased 12 cents during the same period to $2.90 per square foot, far higher than the $2.34 reported last year.
Performing best were Beverly Hills and Santa Monica. At mid-year, Beverly Hills reported a vacancy rate of 4.9 percent, with Class A asking rates of $3.33 per square foot; Santa Monica's vacancy was 5.7 percent and Class A asking rates were $4.11 per square foot.
These markets remain attractive to investors, though the flurry of deals has subsided. Kennedy Wilson bought 9701 Wilshire Blvd. for more than $51 million from Broadway Real Estate Partners LLC . The 108,000-square-foot, 12-story building occupies the northeast corner of Wilshire Boulevard and Roxbury Drive. In Santa Monica, Redwood Capital Partners acquired Commerce Park, the five-acre office park in the 3200 blocks of Olympic Blvd. and Nebraska Avenue, from Pacific Structures LLC for $29.1 million.
Few tenants could close deals, however. No significant leases were recorded in Beverly Hills. In Santa Monica, video game maker Activision Inc . renewed for 125,000 square feet at the Santa Monica Business Park at 3100 Ocean Park Blvd. The deal is reportedly worth $17.1 million over 44 months. Film distributor Genius Products Inc . left San Diego to move the 17,500-square-foot building at 2230 Broadway in a five-year lease worth about $3.6 million.
In Century City, most brokers say it's too early to declare a rebound, but the area's office market improved dramatically by mid-year. The vacancy rate was 10.5 percent in the second quarter, down from 11.2 percent in the first quarter and 17.7 percent in 2004. Asking rates improved, too, at $3.21 per square foot from $3.13 in the first quarter.
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