After a year of manic activity, the Westside real estate market appeared to be cooling down a bit in the first quarter.
But it could have been just a temporary lull while brokers work to close leases in several major office buildings that recently came online.
“The market is still tight,” said Stan Gerlach, a broker with CB Richard Ellis. “The only wild card is what the economy does.”
Office vacancy rates in the first quarter edged up to 9.5 percent from 9 percent in the fourth quarter of 1998, according to Cushman & Wakefield Inc.
Rents remained relatively static, with the average dipping to $2.37 a square foot from $2.39 in the fourth quarter. However, average asking rates were far higher in the most sought-after communities, most notably in Westwood ($2.85 per square foot), Santa Monica ($2.52), and Beverly Hills and Century City ($2.47).
Landlords in West Los Angeles and Culver City were seeking average rates of $1.94 and $1.90, respectively.
While brokers said there is still a high demand for office and retail sites, the majority of lease transactions that closed in the first quarter paled beside the mega-leases that characterized the Westside market in late 1998.
But many brokers say they are now in negotiations to renew existing leases or to pre-lease office space at several large office complexes under construction in the area.
Rollie Armstrong, director of research at Grubb & Ellis, said 1.4 million square feet of office construction and a little less than 1 million square feet of retail is underway on the Westside. Roughly 360,000 square feet was leased in the area during the first quarter.
The lion’s share of large lease deals and construction occurred in Santa Monica, where the volume of new construction drove the vacancy rate to 9.4 percent in the first quarter, compared to 8.2 percent at the end of 1998.
Cushman & Wakefield said much of the recent lease activity stems from the growth of technology and entertainment companies locating in the area.
Among them, U.S. Web leased 44,722 square feet at 2850 Ocean Park Blvd., occupying the former Network Associates/Cyber Media space. EToys expanded to 42,000 square feet (from 25,000) at 3100 Ocean Park Blvd. Meanwhile, 989 Studios, a subsidiary of Sony Corp., leased 19,300 square feet at 1630 Stewart St.
In Marina del Rey, Internal & External Communications Inc., an interactive multimedia training software development company, signed a seven-year lease for 37,000 square feet at 12910 Culver Blvd. And in Westwood, Greyrock Business Credit signed a five-year lease for 20,000 square feet at Oppenheimer Tower at 10880 Wilshire Blvd.
Leasing activity in Santa Monica is expected to pick up later this year when construction is completed on two major office complexes in the area around Colorado Avenue and Cloverfield Boulevard.
The 130,000-square-foot Arboretum Courtyard, located at 2140 and 2160 Colorado, is due to be completed in May, and the 192,500-square-foot Arboretum Gateway, at 2500 Colorado, is slated for completion in October.
At the nearby Water Garden II, a 600,000-square-foot office complex, negotiations are underway to lease about 300,000 square feet, according to Scott Chalmers of project developer J.H. Snyder Co. Water Garden II is scheduled to be completed in July 2000.
In other Santa Monica transactions, realty firm Douglas Emmett & Co. bought a 21-story, 249,536-square-foot office building at 100 Wilshire Blvd. from an affiliate of Asahi Urban Development for $87.5 million.
Elsewhere on the Westside, ground was broken in January for a 240,000-square-foot, 10-story office building planned as the first phase of the Howard Hughes Center. Michael Pollock of Arden Realty Inc. said none of the space has yet been leased, and the asking rental rate is between $2.75 and $3 per square foot.
Plans also call for a 300,000-square-foot, 12-story office building, hotels and a retail center on the property located at the Howard Hughes Center off-ramp of the San Diego (405) Freeway.
Kilroy Realty Corp.’s planned Olympic Boulevard media center fell behind schedule in first quarter, but broker Mike Branigan said it should get back on track in the coming months. At the end of last year, TeleCommunications Inc. signed a 10-year deal for the 78,000-square foot building at 12312 W. Olympic Blvd. where it will house its national digital television division.
Kilroy had planned to break ground during first quarter on an adjacent 150,000-square-foot building, but now plans to begin construction sometime this quarter.
Northrop Grumman is in negotiations to renew its lease on 131,000 square feet of space at 1841 Century Park East in Century City. Stan Gerlach, a broker with CB Richard Ellis who is handling the transaction, said he expects to close the deal in second quarter.
The Westside retail market also remains active but has slowed over the past few months, according to Mark Einbund of Grubb & Ellis.
“Rents are stabilizing and it’s more calm and cautious,” he said. “It’s not as hyped and crazy as it was last year. But rents are up 30 percent from last year, on an average of $2.25.”
? Arden Realty Inc. broke ground on a 240,000-square-foot office building, the first phase of Howard Hughes Center.
? J. H. Snyder received permission from the West Hollywood City Council to build a 270,000-square-foot entertainment, retail and office complex at La Brea Avenue and Santa Monica Boulevard.
? Douglas Emmett & Co. bought the 21-story office building at 100 Wilshire Blvd. in Santa Monica for $87.5 million.
? Loeb and Loeb leased 48,000 square feet to relocate on two floors at 10100 Santa Monica Blvd.
? Internal & External Communications Inc. signed a seven-year lease for 37,000 square feet of space at 12910 Culver Blvd. in Marina del Rey.