Asking rents in the Westside office market are on the rise and nearly all of its submarkets absorbed space in the third quarter. But the area’s overall vacancy rate actually increased due to stumbles in two of its usually shining submarkets, Santa Monica and West Hollywood.
Santa Monica ended the July-September period with the highest Class A asking rates in all of Los Angeles County, at $4.70 per square foot, but it also gave back the most space of any submarket in the county. The seaside city gave back 186,435 square feet, which ratcheted up its vacancies more than 2 percentage points to 14.2 percent, according to Jones Lang LaSalle Inc.
Though there was plenty of activity in Santa Monica during the three-month period, a couple of factors contributed to its uptick in empty space, according to Blake Searles, a Jones Lang LaSalle associate.
For one, many companies are requiring a smaller overall footprint these days. Law firm Bingham McCutchen LLP, for example, downsized from 85,000 square feet to 19,000 at the Water Garden office complex. What’s more, some creative tenants, such as music video website Vevo, are being lured south.
“Tenants from Santa Monica are looking to Playa Vista for competitive economics and unique, creative build-outs,” Searles said. “It’s really developing into a creative hub.”
The community already counts Electronic Arts Inc. and Toms Shoes among its tenants, and Warner Bros.’ celebrity news site TMZ is slated to move in early next year.
West Hollywood, meanwhile, saw its vacancy rate nearly triple during the third quarter, from 6.6 percent to 18.1 percent. The huge jump was due almost entirely to the recent opening of the Pacific Design Center’s Red Building, which tacked a few hundred thousand square feet of new office space on the submarket’s available inventory. Nearly all of that space remains empty.
Overall vacancies on the Westside inched up seven-tenths of a point to 17 percent, though six of its eight submarkets experienced drops in vacancies. The Westside’s tightest submarket, Beverly Hills, saw its vacancy rate dip nearly a point to 11.4 percent, the second lowest rate in the county.
Westside Class A asking rents rose 3 cents to $3.73, well above the county average of $2.87, while year-to-date net absorption topped out at 416,092 square feet, about 90,000 square feet more than the year-ago period.
“Activity is improving. Companies are finding that the outlooks are positive,” Searles said. “They’re hiring staff but being more efficient in the staff that they hire and the way that they use space.”
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