Hollywood's office market continued its tear last quarter as its rents approached Beverly Hills rates and the area took the title of submarket with the lowest office vacancy rate in Los Angeles County.
The Hollywood-West Hollywood market, with a relatively small base of just over 3.7 million rentable square feet, also ended the January-March period with the second highest net absorption in the entire county: 176,908 square feet, up from negative 117,794 during the last quarter of 2007, according to figures from Grubb & Ellis Co.
Class A asking rents soared 9 percent since year's end to $4.45, up more than 37 percent, or $1.20, from the same period a year ago. Class B rents remained steady at $2.99.
Thanks to these skyrocketing rents, some tenants are beginning to look for less expensive space elsewhere, often in North Hollywood and Burbank, or Miracle Mile and Culver City, according to Andy Lustgarten, managing director with Studley.
"Whereas everyone was looking for a very high number six to nine months ago, now we're seeing landlords getting a little bit more aggressive on their rates," said Lustgarten.
The situation could also shift to more of a renters' market when a couple of long-awaited projects come online. The Red Building, an architectural office complex and the final phase of West Hollywood's Pacific Design Center, is slated for delivery by early 2010. In Hollywood, development firm LeFrak Organization is completing a $10 million Class A conversion of a 175,000-square-foot tower at 7060 Hollywood Blvd.
Office Market At a Glance
Inventory: 3.7 million square feet
Under Construction: 400,000 square feet
Class A Asking Rents: $4.45
- Robert Lee & Dorothy Kahn Jonas Trustees sold a 7,629-square-foot, Class B single-story retail building at 7111-7123 Melrose Ave. for $6.3 million to 7111 Melrose Partners LLC. The building's tenants include Pinkberry and M Cafe de Chaya.
- Hudson Capital LLC, a private equity real estate firm, purchased Tribune Studios in Hollywood for $125 million. The location houses the studios of local affiliate KTLA-TV (Channel 11), 11 sound stages and 215,000 square feet of office space on 13 acres. Hudson Capital also owns Sunset Gower Studios in Hollywood, which it purchased for $200 million last year.
- Music company EMI subleased a 12,400-square-foot floor of office space at 1800 N. Highland Ave. to QED for nine years. The rental rate was in the range of $2.75-$3.00 per square foot full-service gross, according to Studley, which brokered the deal.
- Production firm Magical Elves inked a five-year lease for 6,000 square feet of space at 6464 Sunset Blvd. for approximately $3 per square foot per month, full-service gross.
- An individual investor bought a single-story flex building at 800 N. Seward St. from another private investor for $4.5 million, approximately $460 per square foot. The property includes 5,700 square feet of industrial space and 4,000 square feet of office space.
- A 6,678-square-foot apartment building located at 521 North Orlando Ave. in West Hollywood has changed hands between an undisclosed buyer and seller for approximately $1.58 million. The two-story apartment building has nine units and is 100 percent occupied.
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