Major events in Los Angeles County commercial and industrial submarkets in the second quarter.
The Westside office market exploded last quarter as tenants took more space than anywhere else in Los Angeles County, largely driven by a new tech boom in Santa Monica and its environs.
The commercial office market absorbed some 401,000 square feet, according to Grubb & Ellis Co., with more than half of it taken up in the beachside city that is the preferred location for a new generation of tech companies. (See article page 21.)
Hulu, an increasingly popular online TV show and movie streaming site, is a perfect example. It has been in Santa Monica for several years and need more space. It stayed put and took an additional 11,000 square feet at its 12200 W. Olympic Blvd. location.
“There’s pent-up demand,” said Loralie Ogden, vice president of CB Richard Ellis Group Inc.’s Century City office. “What’s fueling the Santa Monica market is the tech companies, bottom line. There’re a lot of startups going there. That and it just hasn’t ever lost its appeal.”
In fact, demand was so strong that some companies either can’t find space or are being priced out of Santa Monica, benefiting nearby communities, such as Marina del Rey and Culver City, which surprisingly absorbed 124,000 square feet of space.
Consider the Mill, a production company in Santa Monica’s Euclid Street corridor that had expanded to capacity in its building. It wanted to remain but there wasn’t enough room so it signed a lease for 22,000 square feet at Blackwelder, a 170,000-square-foot creative office complex in Culver City.
The net result: The vacancy rate plunged nearly a full point across the Westside to 15.7 percent – a dramatic turnaround from the first quarter when the region gave back nearly 91,000 square feet. Eager landlords helped out, dropping asking rents across the board with the exception of Santa Monica and Westwood.
“You’re still taking about 6.9 million square feet that are vacant and it’s just enough to make landlords very competitive in a very choppy economy. In fact, if rental rates were to rise in this market, it would bring velocity to a halt,” said Mike Catalano, executive vice president at Studley Inc.’s West L.A. office.
Asking rates fell 7 cents to $3.69 from the previous quarter. An exception to the positive news was Brentwood, which gave back nearly 24,000 square feet and saw its vacancy rate rise more than a half-point to 15.7 percent.
- Crispin Porter & Bogusky leased new corporate offices at the old Sony Music Entertainment Complex at 2100-2110 Colorado Ave. in Santa Monica. The Miami-based advertising company, known for its “I’m a PC” commercials, signed for 38,000 square feet in a deal valued at $17.5 million.
- Beachbody LLC, which makes the P90X in-home fitness and weight-loss program, signed an 11-year lease renewal for nearly 37,000 square feet at 3300 Exposition Blvd. in Santa Monica.
- Google Inc. signed a lease at 331 Foothill Road in Beverly Hills’ Entertainment Business District to open an office that will also house YouTube staffers. The 13,465-square-foot, 11-year deal is valued at $6.3 million.
- Golden West Properties paid $26.7 million for the Wilshire Beverly Hills Medical Center in one of the Westside’s priciest office sales. The nearly 50,000-square-foot building at 9001 Wilshire Blvd., owned by Iraj and Paula Ziatabari, was nearly 80 percent occupied at the time of sale.
- Open Road Films announced it would open headquarters at 12301 Wilshire Blvd. in Westwood. The film production and distribution company, founded by Regal Entertainment Group and AMC Entertainment Group Inc., signed a seven-year lease for 18,000 square feet valued at $2.5 million.
- Builder’s Bank bought a Malibu condo complex for $14 million out of receivership. The Chicago bank had bankrolled the eight-unit, 25,000-square-foot project that broke ground in 2006, but developer Carbon Beach Partners fell into default during construction.
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