Major events in Los Angeles County commercial and industrial submarkets in the third quarter.
The Westside office market struggled again last quarter, but some submarkets had to be envious of others.
Santa Monica, for example, saw vacancies fall slightly to 13.9 percent during the July-September period, even as the Westside’s overall rate rose two-tenths of a point, according to Grubb & Ellis. Class A asking rents were up a nickel to $4.21 per square foot in Santa Monica but down 4 cents throughout the Westside.
Over the past year, new tenants have scooped up 200,000 square feet of space that Internet services provider Yahoo made available for sublease in Santa Monica, said Mike McRoskey, managing director, Jones Lang LaSalle.
“That space had been hurting the direct leases in the market,” he said. “Now that the less expensive sublease space is being taken off the market, landlords there aren’t going to have to compete with those cheaper deals.”
The Westside’s net absorption rate tumbled into the red during the third quarter, to negative 86,090 square feet, down significantly from the previous quarter when the market absorbed over 400,000 square feet.
Century City – which still boasts the county’s highest Class A asking rents, $4.44 per square feet – also gave back about 80,000 square feet last quarter. “Tenants have a lot of shadow space. As leases roll, a 50,000-square-foot tenant may renew, but only for 35,000,” McRoskey said.
Another factor that could contribute to a drop in Century City lease rates over the next several quarters is Northrop Grumman’s decision to put 140,000 square feet up for sublease now that the company is moving its headquarters to the East Coast.
The Marina del Rey/Culver City submarket recorded the Westside’s highest vacancy rate, 24.4 percent, and lowest Class A asking rents, $2.64 per foot, last quarter. One bright spot: USC renewed its lease for a 160,000-square-foot office tower in Marina del Rey, where it houses its Information Sciences Institute.
Office Market At a Glance
Inventory: 44 million square feet
Under Construction: 320,072 square feet
Class A Asking Rents: $3.72
- Law firm Pachulski Stang Ziehl & Jones signed a 10-year lease to take 31,000 square feet of space at 10100 Santa Monica Blvd. in a 10-year deal worth $18 million. The firm, already in the building, will move to the 13th and 14th floors. The landlord is 10100 Santa Monica Inc.
- Horizon Construction bought a 15,052-square-foot Santa Monica office building from the Girl Scouts of Greater Los Angeles for $3.57 million, or about $237 per square foot. The two-story property is at 2525 Ocean Park Blvd.
- Bigfoot Entertainment Inc., a Venice-based independent film and TV producer and distributor, purchased the Majestic Crest Theater for $4 million from Reel Cinema LLC. The 7,500-square-foot, single-tenant retail building at 1262 Westwood Blvd. in Westwood will be run by Carmike Cinema, a Columbus, Ga.-based operator of nearly 250 theaters, mostly in the South and Midwest.
- Microsoft renewed its lease for about 15,000 square feet of space at the Water Garden, 2425 Olympic Blvd., for five years. Owned by JP Morgan, the Water Garden is a Class A, 17-acre office park totaling 1.27 million square feet in Santa Monica.
- Business marketing firm Advanstar, which is moving from Woodland Hills, subleased 41,000-square-feet of Yahoo Center, 2425 Colorado Ave., in Santa Monica. Yahoo has been subleasing out some of its space since scaling back its workforce in Santa Monica two years ago.
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