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Thursday, Feb 2, 2023

Lesser-Quality Product Struggling in Face of Development Projects

Touchstone Television, producer of “Jimmy Kimmel Live!,” renewed and expanded its headquarters lease at the El Capitan Theatre, 6834 Hollywood Blvd. The four-year deal with California Capital adds a full floor of about 7,000 square feet to the 24,000 square feet it had in the building. Financial terms were not disclosed.

KTLA-TV (Channel 5) renewed its 94,000-square-foot lease at Sunset Bronson Studios with landlord Hudson Pacific Properties.

Hustler relocated its retail storefront from West Hollywood to Hollywood, striking a 10-year deal for 6,000 square feet at 6540 Hollywood Blvd. valued at $2.5 million.

A 35,000-square-foot office building at 1635 Cahuenga Blvd sold for $16.4 million, or $472 a square foot, to a recording artist, one of the highest prices on a square-foot basis ever in Hollywood.

Broad Green Pictures, a feature film production and distribution company co-founded by billionaire brothers Andrew and Gabriel Hammond, signed a one-year deal at 6725 Sunset Blvd. with landlord Kilroy Realty Group. The 4,717-square-foot deal is valued at about $184,000.

After a strong finish last year, Hollywood’s office market took it easy in the first quarter.

The market remained relatively flat as it gave back 6,127 square feet and saw its vacancy rate rise two-tenths of a point to 14 percent, according to data compiled by Jones Lang LaSalle Inc. Still, its vacancy rate is 1.1 points below the year-ago period.

Patrick Amos, at CBRE Group Inc., said the market’s slow-down is really due to its success.

“Hollywood has gotten so tight from a vacancy rate standpoint that all of the quality product has dried up along with the large blocks of space,” he said. “What’s remaining are small, lesser-quality buildings that aren’t competing with the newer renovated or under-construction projects that are getting the most attention in the news media.”

Nonetheless, plenty of deals were done.

Touchstone Television, the entity that operates late-night show “Jimmy Kimmel Live!,” renewed and expanded its headquarters lease in January at the El Capitan Theatre, 6834 Hollywood Blvd., owned by California Capital. The four-year deal for an additional full floor of about 7,000 square feet brings the company’s footprint to about 31,000 square feet in the building.

KTLA-TV (Channel 5) renewed its lease for 94,000 square feet at Hudson Pacific Properties’ Sunset Bronson Studios in March. The Tribune Co.-owned channel plans to move half of that requirement into the $150 million, 315,000-square-foot Icon project being built at the site.

Landlords continued to push up rental rates. Class A asking rates rose 3 cents to $3.84 a square foot monthly.

It wasn’t just office space making headlines last quarter either. Hustler moved out of its longtime West Hollywood home on Sunset Boulevard and took 6,000 square feet on 6540 Hollywood Blvd. in a 10-year deal valued at $2.5 million.

“There’s every version of a mom-and-pop lingerie store on Hollywood Boulevard,” said John Tronson, a principal at Avison Young. “It’ll be interesting to see how well they will do there.”

Investment and development remain hot, too.

A low-rise property at 1635 Cahuenga Blvd. sold for $16.4 million, more than $472 a square foot. The new owner, Mousebutt Holdings, is a vehicle for an unnamed female recording artist. It bought the nearly 35,000-square-foot property, which includes a recording studio and a screening room, from Goldstein Planting Investments and KBS Strategic Opportunity REIT Inc. The new owner is expected to occupy the vacant top floor. The price marks a significant increase over the $7.3 million, $211 a square foot, that the property sold for in 2011.

“The last cycle when high-rises sold, they were between $200 and $300 a square foot, so to see something go for $400 a square foot is significant,” said Tronson. “Price-per-square foot is going up and the market is going up and there’s very little product to buy – office or retail – and when stuff trades, it’s outstriking previous highs.”

– Jacquelyn Ryan

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