Vacancies are down. Asking rents are up. The Hollywood-West Hollywood market must be doing something right.
The market absorbed another 28,000 square feet of office space during the quarter, causing vacancies to fall by more than a half-point to 13.2 percent, one of the lowest rates in Los Angeles County, according Grubb & Ellis Co.
Part of the Hollywood market’s success can be directly linked to that of its entertainment industry tenants, who continue to fare relatively well compared to companies in other industries. There’s also the sense that the worst is over.
“Businesses have gone through severe and drastic cost-cutting measures,” said John Tronson, principal, Ramsay-Shilling Commercial Real Estate Services. “They’ve gotten pretty lean and efficient, and once that gross top line stabilizes, they feel confident about getting back out into the marketplace, growing their business and making commitments like signing long-term leases.”
Class A asking rates rose slightly to $3.66 last quarter, a couple of cents higher than the year-earlier period, marking the first asking-rent increase in more than a year.
“The best space is by and large gone and you’re seeing multiple offers on the stuff coming onto the market right now,” explained Tronson. “Landlords can hold rates much better than they could 12 months ago.”
Class B asking rents were a different story, however, falling nearly a quarter to $2.70 as owners of less desirable buildings slashed rates on space that had been sitting empty.
The picture could get less rosy for Class A landlords, too, once the 300,000-square-foot building at 6255 Sunset Blvd. gets scooped up by a new owner. Unoccupied space in the building totals 100,000 square feet, including about 50,000 square feet vacated by the House of Blues.
“If the new owner ends up buying that at a deep discount, they’ll be in a position to rent office space at more aggressive rates,” said Tronson. “That will have an impact on the market, and everyone’s going to have to compete with it.”
The Hollywood-West Hollywood market was one of the few in the county to end the quarter with a significant amount of office space under construction. The 400,000-square-foot Red Building, part of the Pacific Design Center in West Hollywood, is slated for completion this year. No tenants have been announced.
- Santa Monica-based non-profit Step Up on Second bought the two-story, 25-room Hollywood Motel at 7160 W. Sunset Blvd. and an eight-unit apartment building at 1442 N. Formosa Ave. for a total of $3.85 million. The Patel Family Trust sold both properties.
- Chateau Marmutt, a dog day care, grooming and training service, bought a 4,367-square-foot retail building at 8162 Beverly Blvd. in West Hollywood from Dennis and Roberta Hagerty for $2.14 million. Chateau Marmutt will move out of its West Third Street facility and begin operating at the new property by Feb. 1. The building previously housed a piano store for 60 years.
- Chateau Holdings leased 2,200 square feet at 8085 Selma Ave. in West Hollywood for 10 years for a total consideration of about $742,000. Anthony H. Hanley owns the building.
- Jay E. Silverman leased 5,400 square feet at 920 N. Citrus Ave. in Hollywood to Chrome Hearts, an apparel retailer, for five years. Financial terms were not disclosed.
- True Public Relations inked a lease for 3,865 square feet of office space at 6725 Sunset Blvd. in Hollywood for five years in a deal valued at roughly $580,000. Crown Realty & Development is the landlord.
- AJM Music leased 13,500 square feet at 6725 Sunset Blvd. from Crown Realty for three years. The deal is valued at $1.25 million.
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