Large sale and lease deals across Los Angeles County last quarter helped further cement the notion that the county’s office market has recovered.
The countywide vacancy rate fell nearly a point to 16.1 percent in the first quarter compared with the year-ago period.
“We did not get off to the biggest start countywide during the first quarter in comparison to the fourth quarter of 2014,” said Jim Kruse, senior managing director at CBRE Group Inc. “But there was a tremendous amount of business that was transacted.”
Among some of the biggest were the sales of two Westside creative properties.
Worthe Real Estate Group and Shorenstein Properties sold Playa Vista’s Reserve creative office building, which houses TMZ and Microsoft Corp. among others, for a jaw-dropping $316 million, or about $790 a square foot, to Atlanta’s Invesco. That’s an impressive premium to the combined $76.5 million the sellers spent to buy and renovate the former U.S. Postal Service distribution property in 2011.
Meanwhile, IDS Real Estate Group bought the Beats by Dre properties in Culver City’s popular Hayden Tract from Hackman Capital Partners for nearly $110 million. The deal included two buildings totaling 109,000 square feet that house Beats as well as a 17,800-square-foot property occupied by Steelhouse Inc. Hackman acquired the two Beats buildings for $25.3 million in 2007 and the third property for $2.8 million in 2012.
“You are starting to see these creative office developers – who bought these projects several years ago, renovated them and got them leased – starting to do their exits and the numbers are astounding,” said Transwestern’s Michael Soto. “A lot of these projects are being treated like trophy Class A-type office properties in terms of their pricing.”
That helps explain why investment in this type of office space is on the rise across the market.
In downtown Los Angeles, Rising Realty Group bought Figueroa Courtyard, a five-building, 270,000-square-foot office campus, from U.S. Bancorp last quarter for an undisclosed sum. Rising plans to renovate the property into a creative office campus.
Leasing wasn’t half-bad either.
In one of the top five lease deals in the county, Nickelodeon leased 113,760 square feet in a project that is being built by Oklahoma City developer Accord/Bro Members at 203 W. Olive Ave. in Burbank with plans to consolidate some of its offices. The Burbank-Glendale-Pasadena Tri Cities market saw the vacancy rate drop three points to 14.8 percent and Class A asking rates rise 12 cents to $2.84 a square foot monthly.
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