The Westside commercial real estate boom reached crescendo levels in the first quarter, as dot-com tenants continued to flood the market.

The frantic activity caused the overall vacancy rate to fall to 5.6 percent for the first quarter, way down from 10.5 percent at year-end 1999, according to Grubb & Ellis Co.

“The velocity of leasing is as great as I’ve seen it in my entire career,” said Bob Safai, a principal at Madison Partners.

That demand is also propelling rental rates through the roof. Long the priciest market in L.A. County, the Westside saw its average monthly office rental rate rise to $2.81 a square foot, up from $2.72 in the fourth quarter. And those average rents are somewhat deceptive, because prime space is going for considerably more; Stan Gerlach, senior vice president with CB Richard Ellis, said rents at select Westside buildings could hit $5 per square foot before the end of the year.

“I sent 250 brokers a notice about an Ocean Park Boulevard building with some suites available and got 70 phone calls,” Gerlach said. “It’s a feeding frenzy.”

The Westside’s hottest submarket is Santa Monica, which saw its vacancy plummet to 1.9 percent, down from 8.3 percent in the fourth quarter of 1999. Much of that drop was a result of heated preleasing activity at the second phase of the Water Garden, which is now 65 percent full, according to Clifford Goldstein, partner at J.H. Snyder Co.

New Water Garden tenants include Carat USA, a public relations agency that signed a 40,000-square-foot lease; Regis Business Centers, which will occupy 48,000 square feet; and law firm Greenberg Traurig, which took 28,000 square feet of space.

Tenants in current lease negotiations are enough to fill the 700,000-square-foot project if they all sign on, Goldstein said. By comparison, the Water Garden’s first phase, built in the late ’80s, took four and a half years to absorb.

“You have big blocks of space that are getting absorbed, which take up a considerable part of the market,” Safai said. “You’re not talking about a big market.”

That scarcity is pushing up values of real estate to record levels.

For example, brokers point to the $360 million sale of the MGM Plaza complex to New York-based Tishman Speyer Properties. MaguirePartners sold the 1.1 million-square-foot complex during the first quarter at a profit close to $100 million, industry sources said.

Among the quarter’s key lease deals were a trio of related transactions. US Web/CKS subleased 150,000 square feet that had been vacated by Candle Corp. at the Water Garden’s first phase. Then eToys Inc. subleased 44,000 square feet at the former US Web space at 2850 Ocean Park Blvd. in a three-year deal. Finally, eHobbies sub-subleased 28,000 square feet from US Web out of its space in the Water Garden.

“Space is moving very quickly, since Internet companies like short-term leases,” said Matthew Miller, principal at Cresa Partners. “In the old world five years ago a short-term sublease was hard to get rid of, and now it’s a hot commodity.”

Another pivotal submarket was Century City, which recorded the biggest lease deal on the Westside for the quarter. Fox Entertainment Group signed a new 15-year lease at Fox Plaza for 316,000 square feet valued at $275 million. Fox, which has rented space at the prestigious office tower since the 1980s, will now occupy 42 percent of the building, which is owned by Marvin Davis.

“It’s just an unprecedented deal,” said Jeff Strnad, senior vice president of DLJ Realty Services Inc. “For Fox, it’s where they’ve made their home.”

Culver City also held allure for many creative-type companies this past quarter. The vacancy rate in the Culver City/Marina del Rey submarket tumbled all the way from 11.3 percent at year-end 1999 to 4.1 percent in the first quarter.

In Westwood, Arden Realty Inc.’s newly renovated Westwood Center took center stage. PeopleSupport.com, a provider of online customer service support, leased 50,000 square feet in a five-year, $11 million transaction. In addition, Knowledge Universe and Thirsty.com each took on 20,000 square feet of space.

Retail activity also kept pace on the Westside, where posh corridors such as Montana Avenue in Santa Monica and Beverly Drive in Beverly Hills are reaching peak rental levels.

The fevered pitch was also felt on Melrose Avenue, which has become a haute couture corridor once again, said Edmond A. Sachse, president of Sachse Real Estate Co. Milan-based Costume National opened in March in 3,300 square feet of space on Melrose. The five-year deal was struck at rent of more than $4 a square foot. Another new Melrose lessee is French retailer Ventillo, which will occupy 2,900 square feet at $4 a square foot.

Staff reporter Elizabeth Hayes and contributing reporter Jessica Taverna contributed to this report.