Hollywood landlords may not look back on 2011 as their favorite year in recent history, but at least they can say it ended on a high note.
Tenants absorbed 88,185 square feet of office space during the fourth quarter, a significant increase from the previous three months, when the market gave back 51,373 square feet. That boost helped knock vacancies down more than four points to 25 percent, according to Jones Lang LaSalle Inc.
“2011 was a very good year in Hollywood in terms of completing the recovery and achieving stabilization. Before, you were paying people to move, giving them free rent, whatever you had to do,” said John Tronson, a principal with the L.A. office of Avison Young Commercial Real Estate. “It’s very tepid growth that’s going on, but it’s not going backwards.”
Class A asking rents only rose a penny, to $2.84 a square foot, but it was the first rent increase of any kind in the market in more than 18 months.
Still, Hollywood remains a relative bargain when compared with the Westside. And though many smaller technology and entertainment tenants that are considering Hollywood often look at offices in Westside markets like Santa Monica as well, lower square-foot rents can play a big role in the decision to leave the beach behind.
“People are realizing you’re either going to be paying $4 in Santa Monica or $3 in Hollywood,” explained Tronson. “Where do you want to work? A lot of the younger technology content kids would rather be in Hollywood because it’s kind of cool.”
One such tenant was cell-phone social app maker Grindr, which signed a lease to take 5,400 square feet at 6725 W. Sunset Blvd. for five years.
On the sales side, owner-users – buoyed by Small Business Administration loans –are scooping up available buildings at good prices. But Hollywood may soon become less of a buyers’ market, according to Jeff Luster, chief executive of L.A. brokerage Major Properties, which brokered a deal last fall to sell a plot of land at 1717 N. Gramercy Place to Harridge Development Group LLC. The buyer plans to build 37 townhomes at the location, making it one of a handful of Hollywood construction projects in the works.
“We’re going to see a pickup in development in the Hollywood market. Prices are going to increase,” Luster said of the year ahead. “We’ve seen the bottom and I think we’re on an uptrend.”
Hudson Pacific Properties Inc. purchased a 205,522-square-foot office building at 6922 Hollywood Blvd. for $92.5 million from CIM Group, which invests and develops urban commercial and residential properties. The price includes assumption of a $42.2 million loan that is due in January 2015. The 12-story building was built in 1967 and last renovated five years ago.
Harridge Development Group LLC bought a 40,000-square-foot plot of land, which includes the former Hollywood Christian Church, for $5.7 million. The buyer plans to tear down the structure and develop 37 townhomes.
Cell-phone social app maker Grindr signed a lease to take 5,400 square feet at 6725 W. Sunset Blvd. for five years at $2.84 a square foot with a 3 percent annual increase. Crown Realty & Development is the landlord.
Talent management company Network inked a deal with landlord Sunset Landmark LLC to take two floors totaling 5,000 square feet at 6525 Sunset Blvd. for five years at $2.93 a square foot.
Lorenzo Sgroi, owner of a postproduction equipment firm, bought a building at 1542 Cassil Place for $1.3 million from Cassil Management LLC. The two-story, 1,400-square-foot structure was built in 1964 and completely renovated in 2001.
Future Hollywood LLC, owned by the Nederlander family, purchased a building totaling 1,800 square feet at 1604 Vista Del Mar St. for $855,000 from entertainment design firm the CRP Group.
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