The strengthening Westside office market, where occupancy in Santa Monica topped 92 percent during the second quarter, is starting to look like it did in the dot-com era.
This time, though, the companies occupying the space actually have businesses a good sign for the durability of the market.
“Demand is being driven mostly by existing companies with actual working business strategies and no appetite to spend money as quickly as possible,” said Mark Robinson, corporate managing director for Studley.
Second-quarter vacancy rates for the market that includes Beverly Hills, Santa Monica and Century City fell to 11.6 percent from 14 percent in the previous three months and 16.3 percent for the like period a year earlier, according to Grubb & Ellis Co.
In Santa Monica, vacancies fell to 7.8 percent, less than half the 16.3 percent level of one year earlier. That’s driven an 18 cents-a-foot surge in asking rents over the past three months, to $3.37 a square foot the highest of any submarket in L.A. County.
Many big leases are set to expire in Santa Monica in 2007. At the same time, 440,000 square feet of new space is slated to come online when developers of Lantana Center and the Howard Hughes Center are finished. “The demand is there but so is the supply,” Robinson said. “It will be interesting to see if this stays firm or loosens up over the next few quarters.”
Another comeback appears to be under way in Westwood, which has languished since late 2002. In the second quarter, Class-A asking rents rose 14 cents from the first quarter to $2.80 a square foot, as vacancies fell more than 3 points to 16.4 percent.
The busiest building was 10960 Wilshire Blvd., where Infospace Inc. took 25,000 square feet in a $4 million deal, Woodsmith Henning & Berman also leased 25,000 square feet for about $8 million and Gannett Co. took 11,887 square feet for $2.5 million. Also at 10960 Wilshire, Sony Pictures Entertainment leased 77,200 square feet for five years at an estimated $11 million.
These transactions brought the building’s occupancy to 75 percent and helped drive net absorption of more than 95,000 square feet in Westwood during the quarter.
In Century City, brokers are worried about overbuilding with nearly 800,000 square feet of new space about to come onto a submarket that already has 1.3 million square feet vacant.
“There are big chunks of space available in Century City all built for single-users,” said Neil Resnick, senior vice president and managing director at Grubb & Ellis. “That’s expensive to convert to multi-user so landlords will hold out for big tenants as long as they can.”
Still, deals were getting done.
At 2049 Century Park East, three subleases were inked. Radio & Records, a music magazine publisher, took 19,000 square feet; digital media marketing firm DNA Studio subleased 16,600 square feet; and United International Mortgage relocated from Brentwood to a sublease of 10,100 square feet. Law firm Proskauer Rose LLP expanded and renewed for 54,000 square feet in a 15-year deal. No terms were disclosed.
Elsewhere, Price Raffel & Browne, a subsidiary of Union Central Life Insurance Co., renewed for 20,000 square feet at 1925 Century Park East in an eight-year, $5 million transaction.
In Culver City/Marina del Rey, four properties changed hands amid falling vacancy rates, which dropped 6.7 points in the past year, to 11.9 percent. Over the like period, asking rents have risen 9 cents to $2.34 a foot in Class-A buildings. Active buyers included Scanlan Kemper Bard, which purchased 200-300 Corporate Pointe in Culver City from Slauson Associates LLC. The 204,600-square-foot property sold for $39.3 million. Also trading was the 204,200-square-foot Playa Vista Corporate Center, which ECI Jefferson LLC acquired for $32 million from Citicorp North America, a Citigroup Inc. unit.
Pacific Real Estate Group of Laguna Hills purchased the 115,081-square-foot Promontory at 5901 Green Valley Circle in Culver City from TIAA-CREF for $22.4 million. In an owner-user transaction, Shlemmer + Algaze + Associates bought the 8,000-square-foot building at 6041 Bristol Parkway. The interior design firm will relocate from West Los Angeles.
One large lease transaction was recorded. ARINC renewed its 19,000 square feet of space at Marina Business Center (4553 Glencoe Ave.) in Marina del Rey in a five-year deal valued at $2.5million.
“The last couple of years have been historic,” said Bob Safai, co-founder of brokerage Madison Partners. “Now we’re seeing institutions cashing out of deals.” He expects sales to remain strong through year-end, barring a calamity in the financial markets.
But Santa Monica was the big story. MTV renewed and expanded at 2600-2800 Colorado Ave. in a 10-year deal that adds 22,000 square feet to the network’s lease, for a total of 128,000. At Santa Monica Business Park, Tennis Channel Inc. renewed its 25,000-square-foot lease at 2850 Ocean Park Drive and Guthy-Renker Corp. expanded by 10,842 square feet at 3340 Ocean Park Blvd.
Infospace Inc. took 25,000 square feet at 10960 Wilshire Blvd. in a $4 million deal; in the same building, Woodsmith Henning & Berman leased 25,000 square feet for about $8 million.
MTV renewed and expanded at 2600-2800 Colorado Ave. in a 10-year deal.
Pacific Real Estate Group of Laguna Hills purchased the 115,081-square-foot Promontory at 5901 Green Valley Circle in Culver City from TIAA-CREF for $22.4 million.
At 2049 Century Park East, Radio & Records took 19,000 square feet, DNA Studio subleased 16,600 square feet, and United International Mortgage relocated from Brentwood to a sublease of 10,100 square feet.