The Westside office market is making a comeback. You just wouldn’t know it by glancing at the numbers.
The region continued to give back space, 90,926 square feet of it, sending vacancy rates up two-tenths of a point to 16.6 percent, according to Grubb & Ellis Co.
Here’s the good news. The negative net absorption was narrower than in the fourth quarter and much narrower than a year earlier, when it just about hit 326,000 in 2010’s first quarter. In fact, landlords felt there was enough tenant interest to raise Class A asking rates two pennies to $3.76 per square foot.
So, what’s up? Exciting deals are, such as one by Google Inc., which leased 100,000 square feet in Venice as well as 13,000 square feet in Beverly Hills. In addition, there’s buzz about Silicon Valley firms such as Facebook Inc. scouting Westside property.
“(Silicon Valley firms) have come on down here trying to get a media division,” said Transwestern senior research analyst Arty Maharajh. “They’re picking great places … and are trying to pull (talent) from beach communities.”
There was perhaps no better example of that attraction than the draw of Santa Monica, which has been nicknamed “Silicon Beach” by some. Even though it gave back space and the vacancy rate rose more than a half-point to 12.1 percent, asking rents ballooned 18 cents to $4.38.
Century City was the Westside’s brightest spot, with an asking rate of $4.52 per square foot. It also absorbed 3,893 square feet after giving back 175,471 in the previous quarter. The vacancy rate remained flat at 15.5 percent as some established tenants such as law firm DLA Piper LLP doubled space but others left the market for lower-price areas. (See article page 21.)
“I think the speed at which West L.A. is coming back is something to get excited about,” said Brent Bissell, Colliers International associate vice president. “There’s a lot of optimism (in West Los Angeles), more than in any other submarket. We’re definitely in a better place than we were 12 months ago.”
Some submarkets fared better than others.
Marina Del Rey-Culver City, which traditionally has been the weakest submarket, continued to perform poorly. Vacancy rates were up by nearly 1 point to 29.5 percent, as 60,517 square feet were vacated. However, Class A asking rates inched up a penny to $2.66.
- Tishman Speyer Properties LP purchased the Hilton Hotels Corp. headquarters at 9336 and 9346 Civic Center Drive in Beverly Hills. The vacant double-building property, with a total of about 185,690 square feet of office space, sold for $62 million in January to the New York commercial real estate firm.
- JP Morgan Chase & Co. purchased the 488,000-square-foot office development at 12121 and 12181 Bluff Creek Drive in Playa Vista’s Horizon complex for $270 million. The space was leased by Fox Interactive Media.
- Santa Monica real estate investment trust Douglas Emmett Inc. purchased Beverly Hills’ William Morris Plaza at 150 S. Rodeo Drive in March. The 68,000-square-foot property was one-quarter vacant but sold for $45 million.
- Santa Monica-based Ocean West Capital Partners bought West L.A. office complex Tribeca West for $58 million. The 151,029-square-foot office property, at 12233 Olympic Blvd., was owned by Broadreach Capital Partners.
- Mountain View search engine giant Google Inc., secured a 13-year lease valued at $42.9 million for more than 100,000 square feet at 340 Main St. and adjacent property in Venice, including Frank Gehry’s famous Binocular Building. The tech firm also signed an 11-year lease valued at $6.3 million for 331 Foothill Road in Beverly Hills.
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