For the first time since late 2004, every segment of the Westside submarket charted double-digit vacancies. Bankruptcies and closings are partly to blame, along with a flood of sublease space hitting the market in the wake of corporate downsizings and consolidations.
The overall vacancy rate rose to 12.8 percent in the opening quarter from 8.6 percent a year earlier ago as 665,873 square feet was put back on the market, according to Grubb & Ellis Co. The surfeit of space drove average asking rates down 9 percent on the year to $4.21 per square foot.
In Culver City-Marina del Rey, the vacancy rate was 17.6 percent in the quarter, the highest on the Westside. Average asking rates plummeted nearly 15 percent on the year to $3.10 per square foot. Hit hardest were creative spaces such as Jefferson Avenue, which were almost half-vacant, said Gary Weiss, principal of L.A. brokerage Madison Partners.
"That's a lot of space for that market," Weiss said.
Even Santa Monica, the county's most expensive submarket, felt the pinch. Average asking rates were down almost 14 percent from a year ago to $5.26 per square foot. Vacancies rose to 15 percent, a figure not seen since the tech bust.
"It's a natural correction driven by tenants," said Neil Resnick, executive vice president of Grubb & Ellis' tenant advisory group. "(They) are tempted by the numerous sublease opportunities in prime buildings at substantially below landlord's asking rates."
Performing better was Century City, even though vacancies rose to 10.6 percent from 8.1 percent at the same time last year. Landlords were asking an average of $4.62 per square foot, only 3.7 percent less than they sought one year ago. The area's convenient location and concentration of professional services firms made it attractive even in a down market.
"Century City had a lot of renewals, some long term," said Nicole Page, senior research analyst at Jones Lang LaSalle Americas. "This is the first time in a while that we're seeing some forward-looking activity."
Office Market At a Glance
Inventory: 43.2 million square feet
Under Construction: 1.2 million square feet
Class A Asking Rents: $4.21
- Greenberg Glusker Fields Claman & Machtinger LLP, a law firm specializing in entertainment and real estate law, inked a 15-year lease renewal for its headquarters space at the 28-story 1900 Avenue of the Stars in Century City. The firm will continue to occupy 61,806 square feet on the 20th, 21st and 22nd floors for a total consideration of $61.6 million.
- BDO Seidman, a financial services firm, took 24,385 square feet of space at the Eighteen Eighty Eight Building at 1888 Century Park East in Century City. The firm will occupy the fourth floor of the 21-story, 484,000-square-foot building, which was built in 1970 and renovated in 1996.
- Online jewelry retailer Bidz.com completed a 32-month lease renewal for 50,000 square feet at 3562-3582 Eastham Drive in Culver City. The company's previous lease was set to expire in November. The renewal extends the lease through June 2012. The 70,700-square-foot flex building sits on 3.4 acres and was renovated in 2000.
- Shopzilla Inc., a Web-based comparison shopping portal, put 30,000 square feet of sublease space on the market. That's almost half of the company's 70,000-square-foot space in the Westside Media Center at 12100, 12200 and 12312 W. Olympic Blvd.
- First Property began marketing nearly 40,000 square feet of sublease space at 2000 Avenue of the Stars, the area's newest office tower. The asking rate is $4.50 per square foot. Local brokers estimated the original lease was valued around $6.
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