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.
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