The heat was still on in Hollywood’s office submarket last quarter.
Tenants took an additional 1,384 square feet off the market in the fourth quarter to give the area a 13.8 percent vacancy rate, down six-tenths of a point from the year-ago period and flat from the previous period, according to data compiled by Jones Lang LaSalle Inc.
The strength of the market allowed landlords to push Class A monthly asking rates up 24 cents year over year to $3.81.
“Rental rates are higher than they’ve ever been and (sales) are really impressive,” said John Tronson, a principal at Avison Young Inc. who specializes in deals in the submarket. “It’s a transitional time where we are really stepping into the next level of office leasing.”
Much of the activity was driven by media and creative firms, such as postproduction company Lit Post, which leased 15,000 square feet at the Lab, 900 Cahuenga Blvd., from landlords Birch Tree Properties and Metric Holdings.
But Hollywood’s biggest lease deal in the quarter was at a project not yet even open. In the largest deal in Hollywood in a decade, Viacom Inc. signed a 12-year deal for 180,000 square feet at Kilroy Realty Corp.’s Columbia Square mixed-use project, which will have a combined 350,000 square feet of office space. Viacom plans to consolidate its MTV, Comedy Central, BET and Spike TV units in the space that will fill nearly all of a six-story building on the $420 million campus, which is expected to open next year.
That lease alone is significant, but it speaks even larger volumes about the health of the Hollywood submarket when coupled with the 90,000-square-foot deal that co-working space NeueHouse signed there in the third quarter.
“Viacom was a game-changer,” said Nicole Mihalka, senior vice president at JLL. “There’s interest coming from that. Not just from investors and tenants but developers who may have been looking at other parts of L.A. who are now looking at Hollywood.”
Indeed, the 2.3 million-square-foot office market has more than 680,000 square feet of office space under construction, including Columbia Square. It’s the largest amount of office construction in Los Angeles County.
That speculation is driving up bidding wars for space in the market.
In the fourth quarter, R.D. Olson Development bought a 24,000-square-foot property now occupied by a Jack in the Box for a near-record land price per square foot of $581, or $13.8 million total, with likely plans to build a hotel in five years when the fast-food chain’s lease expires.
The only deal in the submarket that reached a higher level was the long-term ground lease for the site of the TCL Chinese Theatre by New York’s KLM Construction, valued at $714 a square foot.
“We have never seen these prices,” Mihalka said.
That bodes well for the future of the market, brokers agreed.
“It’s never been a better time to sell a piece of real estate in Hollywood in terms of marking a profit off your investment,” said Tronson. “It may continue to get better but it’s never been better than it is now especially for development sites.”
– Jacquelyn Ryan
Viacom Inc. signed a 12-year deal for 180,000 square feet at Columbia Square, a $420 million campus under development by West L.A. real estate investment trust Kilroy Realty Corp.
A 24,000-square-foot property at 6409 Sunset Blvd., where a Jack in the Box now stands, sold for $13.8 million, at a near-record price per square foot of $581, as a development site to R.D. Olson Development. The seller was Baird Hogan Family Trust.
Pam & Gela apparel company signed a deal for 4,000 square feet at Metropolitan Creative, 5825 Sunset Blvd., with landlord Atkinson-Cornerstone, according to CoStar Group Inc.
Entertainment studio 20th Century Fox signed a new lease for 2,000 square feet at Sunset Media Tower with landlord Kilroy Realty. Terms of the deal were not disclosed but asking rates at the building are $4.05 a square foot.
Postproduction studio M1 Digital Studios did a three-year deal at 1400 N. Cahuenga Blvd. for 11,845 square feet. Landlord Granite Prospects is in escrow to sell the property to a hotel developer but is signing short-term leases until the sale is completed. The M1 lease is valued at nearly $1 million.
For reprint and licensing requests for this article, CLICK HERE.
Stories You May Also Be Interested In
- REAL ESTATE QUARTERLY: Vacancy Rate Rises but Big Leases by Media Firms Steal Spotlight
- Market Gives Back Space But Landlords Still Hike Up Rents
- REAL ESTATE QUARTERLY: Submarket Still Developing With 1.1 Million Square Feet Under Way
- Entertainment, Creative Companies Help Turn Submarket Into Star
- Real Estate Quarterly: Developers Anxious to Add Projects to Already Bustling Market
- Flood of Small Leases Ends Yearlong Run of Rising Vacancies
- Hollywood: Rising Rents Expected to Stick Around After More Space Opens
- Rents Rise in Hollywood as ‘Good Stuff’ Attracts Premium Prices