WESTSIDE: Decrease in Rents Stokes Some Confidence in Area

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Los Angeles’ Westside may boast the county’s most comfortable climate, but the area continues to weather a storm when it comes to its office market.

Net absorption fell further into the red during the July-September period, while Class A asking rents decreased 20 cents to $3.95, bringing them below $4 a square foot for the first time in two years, according to Grubb & Ellis Co.

But the more attractive rents – in addition to a recent mentality shift – have an upside.

“People are no longer saying, ‘The world is coming to an end, we’re going into a depression,’” said Hunt Barnett, principal at Madison Partners. “They’re saying, ‘We’re going to make it through. It’s a recession.’ They realize we’ve been through this before — during the 2000-2001 time period, in the early ’90s, in the mid-’80s.”

Those previous downturns saw vacancies top out at 18 percent to 20 percent, Barnett said, still above the Westside’s current average of 15.1 percent, up from 13.4 percent in the second quarter. With activity heating up, Barnett said he doesn’t expect overall vacancy to reach those historic highs this time.

“I think the fourth quarter is going to look significantly different than the third,” he predicted.

West Los Angeles clocked in with the market’s lowest vacancy rate, 10.9 percent, while vacancies in the Marina-Culver City submarket spiked to 24.4 percent after social networking site MySpace.com, owned by Fox Interactive Media, canceled plans to occupy nearly 500,000 square feet in Playa Vista.

That property aside, the amount of new space coming on line for sublease has been decreasing this year, in part because entertainment and media firms shed excess square footage early in the recession, according to Nicole Page, senior research analyst at Jones Lang LaSalle.

“They’re the ones that are easily influenced by consumer spending so they were very swift to lay off employees and downsize almost immediately,” she said.

Office Market At a Glance

Inventory: 43.5 million square feet

Under Construction: 744,000 square feet

Class A Asking Rents: $3.95

MAIN EVENTS

  • ICDC College, a vocational training school, purchased a Culver City office building for $7.9 million from 5995 S. Sepulveda LLC. The 24,086-square-foot property, at 5995 S. Sepulveda Blvd., was constructed in 1973 and renovated five years ago.

  • Sony Corp. renewed its lease for more than 50,000 square feet at 6080 Center Drive West in Westchester’s Howard Hughes Center for five years with landlord Equity Office Properties. Though the electronics firm occupies more than 73,000 square feet on three floors of the 12-story building, Sony has not decided if it will extend its lease on the rest of its space.

  • J Arthur Greenfield & Co. signed a lease to take 7,000 square feet of space for 10 years in Oppenheimer Tower at 10880 Wilshire Blvd. in Westwood for approximately $2.8 million. Also in the building, the federal General Services Administration Military Entertainment Public Relations renewed a lease for 14,000 square feet in a deal valued at $4.6 million.

  • Law firm Reuben Raucher & Blum inked a seven-year lease with Equity Office Partners to take 13,000 square feet on the 18th floor at 10940 Wilshire Blvd. in Westwood for seven years in a deal worth $3.6 million.

  • Realty Center Management Inc. leased 5,808 square feet of office space at 10474 Santa Monica Blvd. in West Los Angeles to law firm Krohn & Moss. The 136-month lease is valued at approximately $2.5 million.

  • In Santa Monica, high-end furniture retailer Knoll Inc. renewed its lease for 15,193 square feet at 214 Wilshire Blvd. The $8.4 million deal gives Knoll the space for the next 124 months.

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