The Westside still boasted the loftiest asking rates in Los Angeles County in the third quarter, fueled by strong fundamentals and some of the lowest vacancies in the 4,084-square-mile region.
Overall, the market posted a 6.8 percent vacancy rate in the period, down from 9.8 percent a year ago, according to figures from Grubb & Ellis Co.
Average asking rates soared as space dwindled. The rate for Class A space was $3.29 per square foot, significantly higher than the $3.18 in the previous quarter and $2.88 in the same quarter last year. Suggested rents for Class B space increased to $2.98 per square foot, up from $2.50 a year ago.
"Limited development is placing a collar on new supply, sustaining rental rate growth through the end of the quarter," said Lisa St. John, managing director of Jones Lang LaSalle Americas Inc.
Santa Monica recorded the highest average asking rate in the county at $4.34 per square foot. Even landlords of Class B space were asking $3.44 per square foot, a rate higher than even top tier space in Beverly Hills.
In the city's most notable deal, the Game Show Network sublet about 40,000 square feet on two floors of the Arboretum Courtyard, 2120 Colorado Ave. Terms were not disclosed. The network will move to a direct lease January.
Beverly Hills' 4.2 percent vacancy eclipsed every market south of the Santa Monica Mountains and equaled Pasadena. That high occupancy rate continued to interest investors, such as L.A.-based North American Realty. The firm purchased a 36,099-square-foot building at 8350 Wilshire Blvd. for $10.2 million from Sandstone Properties of Santa Monica. The building is 87 percent occupied.
Still, the most compelling performance of the third quarter was provided by Century City. After capturing the spotlight for all the wrong reasons (double-digit vacancy and stagnant rents), Century City began showing signs of life in the first half of the year and was ready for its close-up in the third quarter.
The submarket experienced the largest decline in vacancy on the Westside, achieving single-digit vacancy for the first time since 2001. Vacant space dropped 3.7 points on the year to 7.8 percent. "There were some big changes in Century City in the third quarter," said Blake Mirkin, senior vice president of CB Richard Ellis.
Average asking rates rose on the high occupancy and new building owners' desire to raise revenues to recoup acquisition costs. Landlords asked $3.26 per square foot in the third quarter, up 24 cents on the year and approaching the $3.30 per square foot suggested in 2001.
2000 Avenue of the Stars, which is still under construction, added to its entertainment- and financial-oriented tenant base, anchored by Creative Artists Agency and Fidelity Investments. First Look Pictures took 40,000 square feet for $40.00 per square foot full-service gross, or $3.33 per square foot.
"It's now 66 percent leased and it's not even finished," Mirkin noted. "They're well ahead of pro forma. Now they can sit back and be comfortable."
International Creative Management sublet 92,847 square feet of the MGM sublease space at MGM Tower, 10250 Constellation Blvd. The 12-year lease is valued at more than $55 million. MGM took back the remaining portion of the 350,000-square-foot space, pulling a large chunk of space off the market after more than a year.
Elsewhere, City National Corp. is consolidating two bank branches into a new branch on the ground floor of Century Plaza Towers at 2029 and 2049 Century Park East. The 25,000-square-foot, 15-year deal includes non-branch space, as well. The value was not reported.
"Originally Century City was the only alternative to downtown Los Angeles as far as office space. However, over the years other submarkets emerged such as Santa Monica, Burbank, San Fernando Valley, Ventura Corridor and became acceptable alternatives to Century City," said Bryan Lewitt, senior director for Cushman & Wakefield of California Inc. "Century City is regaining the same prominence it had 20 years ago."
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