Main events in Los Angeles County’s submarkets.
Office vacancies in Hollywood climbed slightly, up to 15.4 percent in the third quarter from 14.2 percent the prior period, and a full 5 points higher than the same period a year earlier. More than 25,000 square feet came back onto the 2.3 million-square-foot market in the quarter, according to data from Jones Lang LaSalle Inc.
The return to the submarket of newly renovated office spaces like the Eastman Kodak Co. campus at Santa Monica Boulevard and Las Palmas Avenue contributed to the increase in the quarter’s vacancy rate.
John Tronson, a principal in the Hollywood Hills office of commercial brokerage Avison Young Inc., said that he saw an increase in transactional activity in the last quarter despite the modest giveback.
“There’s been very little change in vacancies. But I’ve seen a big change in market velocity, the deals being done, the offers being made and how many more tours were going down,” he said. “There are prices equal to 2007 levels, but it’s not quite as crazy. There are multiple offers on high-quality spaces.”
Rents in the submarket continued to rise in the quarter. The average Class A asking rent was $3.37 a foot, up 5 cents from the second quarter and 16 percent higher than the $2.90 a year earlier.
That increase comes even with a whopping 330,000 square feet under construction, second only in Los Angeles County to the 400,000 square feet coming out of the ground in downtown Los Angeles.
Feeding the boom is Kilroy Realty Corp.’s Columbia Square project at 6121 Sunset Blvd., which will have 330,000 square feet of new office space as well as 100,000 square feet of renovated space inside a former CBS soundstage.
“We’re seeing landlords reconditioning space to put out in the market in more creative configurations, which is bringing additional space,” said Nicole Mihalka, a Jones Lang LaSalle senior vice president. “There’s a higher demand in creative space, with features like exposed ceilings. As a trend we’re seeing more tech companies coming into the market.”
Occupancy at Columbia Square is expected to start in January 2015, Mihalka said.
Tronson said he believed that with large spaces like Columbia Square close to coming on line, more tenants will start coming in from other submarkets.
“We’ve never had big blocks of space, but with the new construction, we’re going to see some bigger tech tenants that would typically be focused on the Westside,” he said. “Hollywood is as affordable as anywhere else and it’s got good transportation.”
As more developments like Columbia Square and Kilroy’s $79 million, 22-story Sunset Media Center, at 6225 W. Sunset Blvd., finish renovations, asking rent will go up because of added technical improvements, he said.
“Historically in Hollywood, the good stuff goes at a premium,” Tronson said. “It’s an image-driven market.”
On the investment side, Hollywood saw several significant transactions in the quarter.
BRE Properties Inc. purchased the 270-unit multifamily Jefferson at Hollywood project, on Highland Avenue north of Hollywood Boulevard, for $120 million. Pebblebrook Hotel Trust purchased the 57-unit Redbury Hotel on Vine Street for $34 million.
– Justin Yang
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