The nascent recovery in the Westside office market is picking up momentum as many fast-growing companies look to the red-hot Santa Monica area for space.
Dubbed Silicon Beach due to the proliferation of tech and new-media companies in the area, Santa Monica was Los Angeles County’s most expensive market in the third quarter, at $4.20 a square foot – and one of its most crowded. The area’s 10.1 percent vacancy rate trailed only West Hollywood, according to Jones Lang LaSalle Inc.
The interest in the area has helped drop the Westside’s overall vacancy rate a half-point to 17.2 percent in the third quarter, the largest single-quarter drop since the market started to recover. The Westside absorbed more than 90,000 square feet.
“It’s as active as we’ve seen it in a long time,” said Jim Jacobsen, founding partner of Industry Partners in Santa Monica.
E-commerce companies BeachMint and LivingSocial each signed leases in Santa Monica during the third quarter. But it’s not just Internet startups interested in the area: Beachbody LLC, a maker of fitness products, expanded its offices at Santa Monica’s Lantana Entertainment Media Campus by 36,500 square feet when it signed a $10 million, seven-year lease.
Jacobsen noted that the market has tightened up, forcing some companies to look elsewhere to accommodate growth requirements. With few sizable spaces left, many larger companies are looking to Playa Vista.
In one of the highest-profile signings of the quarter, Facebook Inc. inked a 10-year lease for 12,000 square feet at the Tishman Speyer complex in Playa Vista. The area also is attracting acquisitions. In August, Manhattan Beach real estate investment company Vantage Property Investors bought Playa Jefferson, a 200,000-square-foot office complex for $33 million.
The interest in Santa Monica and surrounding areas has pushed rents way up. Class A asking rents in Santa Monica rose 5 percent last quarter, helping boost the overall Westside rent by four cents to $3.62 a square foot.
The sky-high rents are forcing some companies to look for cheaper digs elsewhere. Internet company Mahalo.com moved to Culver City, where it took 13,300 square feet.
Not all of the historically strong Westside submarkets did well during the quarter. Century City saw its vacancy rate rise from 14 percent to 16 percent as a result of large recent defections, including Northrop Grumman Corp., which moved its headquarters to Falls Church, Va.
Dave Toomey, a principal with real estate advisory firm CresaPartners LLC, cautioned against reading too much into single-quarter swings.
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