The sprawling Westside office market continued to be a story of winners and losers, as demand remained largely sluggish outside of red-hot Santa Monica and its environs, and Beverly Hills, according to Jones Lang LaSalle Inc.
Rents for Class A tenants in Santa Monica climbed to $4.37 a square foot, the highest in Los Angeles County, driven by the continuing success of Silicon Beach, an area where tech companies have clustered.
With limited space in Santa Monica, the lower Westside became a landing area for tech companies. Though vacancies are still high at 32 percent, the Marina del Rey-Culver City area absorbed more than 70,000 square feet in the quarter, propelled by a 40,000-square-foot lease in Playa Vista that Google Inc.’s YouTube LLC announced in February.
“There are pockets of hot areas in the market and there are pockets where it’s just status quo,” said Mike McRoskey, managing director of Jones Lang LaSalle’s Century City office.
Qualifying as hot was Beverly Hills, which has rebounded strongly in the last year. Vacancies dropped again in the first quarter and are now at 13.4 percent – more than six points lower than a year earlier. Asking rents remained steady at $3.65 a square foot as the market absorbed nearly 113,000 square feet of space. Much of that activity has been due to tenants upgrading to a Beverly Hills address during the down market, said Mike Catalano, executive vice president at Studley Inc.
A couple of other submarkets – West Hollywood and Westwood – saw their markets tighten but at the cost of lower asking rents. West Hollywood’s 6.4 percent vacancy rate remains the county’s lowest.
Century City, Brentwood and West L.A.-Olympic Corridor saw rising vacancies. The rate in Century City inched up one-tenth of a point during the quarter and is now at 16.7 percent, well above the 13.8 percent of a year earlier. The market is still feeling the effect of law firms departing, as well as Northrop Grumman Corp. moving its headquarters to Falls Church, Va.
Still, the broader Westside market absorbed 111,951 square feet in the quarter, but Studley’s Catalano said that he is worried that won’t hold up if the demand from tech companies cools off.
“There still seems to be a lot of sluggishness in tenant activity, and tenants are still looking for ways to downsize their space,” Catalano said. “If the technology bubble pops, which there is some talk of, then West L.A. will have nothing to report that’s favorable, instead of very little to report.”
Gores Group bought a three-story, 40,000-square-foot office building at 9800 Wilshire Blvd. in Beverly Hills from law firm Liner Grode Stein Yankelevitz Sunshine Regenstreif & Taylor LLP for $24.5 million. The private-equity firm will move from its Westwood offices once remodeling is completed next year. Westwood-based Liner Grode bought the building in December 2010 for $13.5 million but never moved in.
Korman Communities bought the Crescent Beverly Hills apartment complex at 155 N. Crescent Drive from CWCapital Asset Management for $85 million. The developer plans to turn the building into a luxury extended-stay hotel.
Financial services firm Sun Life Assurance Co. of Canada bought a 101,000-square-foot office building at 10351 Santa Monica Blvd. near Westwood for $39.5 million. The building, previously owned by Cambra Realty and Angelo Gordon & Co., is occupied by entertainment industry tenants including 20th Century Fox Studios.
Internet video company YouTube LLC signed a lease for a 41,000-square-foot office at Ratkovich Co.’s Hercules Campus in Playa Vista. Terms of the deal were not disclosed. The campus is the former site of Howard Hughes’ aircraft manufacturing facility, and is being renovated to attract tech and media companies.
West L.A. developer Korda Group bought a 37,000-square-foot building in Santa Monica for $12 million from Sandstone Properties Inc. The property was only 72 percent leased but sold at a premium for $323 a square foot.
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