Asking rents in the Westside office market rose to their highest level in three years in the fourth quarter, driven by continued demand from tech, media and entertainment businesses.
Class A asking rents were $3.77, up from $3.73 the previous quarter, according to Jones Lang LaSalle Inc. The overall vacancy rate was flat at 17 percent, with a strong performance from Santa Monica offsetting slight vacancy increases in most other submarkets.
Santa Monica, ground zero for the explosion of tech and creative companies in the region, continues to lead the way. It ended the October-December period with the highest Class A asking rates in all of Los Angeles County, at $4.73 a square foot. That was up from $4.70 the previous quarter and $4.28 a year ago.
The seaside city saw net absorption of 168,000 square feet, dropping its vacancy rate to 12.1 percent as tech and creative companies continue to stream in, including Acento Advertising Inc., which relocated from West Los Angeles and signed a lease for 19,000 square feet at 2001 Wilshire Blvd.
“There’s a lack of supply and availability, while demand is coming from tech and entertainment companies,” said Andrew Jennison, a partner at brokerage Industry Partners. “Professional services companies are willing to pay the freight and do what it takes to have an office in Santa Monica.”
The rest of the region was a mixed bag, with six out of the other seven submarkets experiencing small upticks in vacancy, but most also seeing a rise in asking rents.
The vacancy rate in Beverly Hills rose a half-point to 11.9 percent, while rents there rose three cents to $3.61 a square foot. The Marina del Rey-Culver City area’s vacancy rate remained unchanged at 30.8 percent, while rents rose two cents to $2.81 a square foot.
West Hollywood, meanwhile, has had a high vacancy rate since the opening of the Pacific Design Center’s Red Building last year, which added a few hundred thousand square feet of empty space and remains almost entirely unleased. The submarket’s vacancy rate was once the lowest in the county, but nearly tripled after the Red Building’s opening. Vacancies rose seven-tenths of a point to 18.8 percent.
Blake Searles, an associate at Jones Lang LaSalle, said rents would continue to rise in Santa Monica, and drive tenants elsewhere.
“You didn’t see a lot of movement over the last couple of years because the lack of capital to move or reconfigure precluded companies from doing so,” he said. “But now you’re seeing more activity on that front.”
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