The Westside closed out 2014 with the highest average asking rents in Los Angeles County. Landlords in the submarket sought an average of $4.19 a square foot for Class A buildings, 38 cents more than Hollywood, the closest competitor. Helping drive asking rents was a tightening of the market, which moved to 14.1 percent in the fourth quarter from 14.8 the prior period and 15.6 percent a year earlier, according to data provided by Jones Lang LaSalle Inc.
“Strong tenant demand has driven rates higher in almost all West L.A. submarkets, and we are approaching prerecession highs,” noted Mike McRoskey, a JLL managing director. Institutional landlords and activity in the capital markets also contributed.
Beverly Hills and Santa Monica recorded the highest asking rates, with landlords seeking $4.75 a square foot. The figure represents a decline for Beverly Hills, where asking rents reached $4.82 in the third quarter. It marks an increase for Santa Monica, which was up from $4.49 in the third quarter.
That’s good news for landlords in adjacent submarkets as tenants getting priced out of the premier areas seek refuge in nearby lower-cost opportunities.
“Rising rents may force certain users in or looking at markets like Santa Monica to reassess if they need to be in that submarket,” said Neil Resnick, principal with Avison Young. “Certain pockets in West L.A. remain more economical.”
In Brentwood, for example, the average asking rate rose 12 cents in the quarter and 24 cents over the course of the year to finish 2014 at $3.59 a square foot. Its vacancy rate dipped to 16.3 percent from 16.8 in the third quarter and 20.1 percent the year earlier. Century City saw a similar trend, with asking rates increasing 25 cents to $4.51 a square foot and vacancy decreasing to 14.3 percent in the final period from 15.4 percent the previous one.
Other tenants might abandon the Westside entirely. For instance, Viacom Inc. moved from Santa Monica to the Gower Building at Columbia Square, 6121 Sunset Blvd., in Hollywood.
“This is a reverse in the long-term trend of companies moving east to west, and the first major tenant to make the move,” said Travis Landrum of Industry Partners.
Investors remained enamored of Silicon Beach-Playa Vista, helping make the case for its designation as a distinct submarket.
Two major tech transactions were recorded there in the final quarter.
Yahoo Inc. leased 130,000 square feet in the Collective, at 11975, 11985 and 11995 W. Bluff Creek Drive. Terms of the deal were not disclosed. The buildings are expected to be available for occupancy in the second quarter.
Google Inc. purchased two land parcels on Millennium Drive from Lincoln Property Co. for a reported $120 million. The property is zoned for 900,000 square feet of commercial space and could accommodate up to 6,000 people if built out as office space.
On the strength of its high-performing markets, the Westside will continue to thrive, McRoskey said.
“Almost every market throughout West Los Angeles has seen meaningful rent growth, and perhaps the most remarkable change we have seen is the firming up of and commitment to the development of Playa Vista.”
– Margot Carmichael Lester
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