HOLLYWOOD: Office Submarket Boosted by Entertainment Tenants

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As the country falls deeper into an economic crisis and the Southern California real estate market takes a beating, the Hollywood office market is hanging in there.

That’s largely thanks to its reliance on entertainment tenants that remain in better shape than those in many other industries. But the picture isn’t completely rosy, of course.

Office vacancies in the Hollywood-West Hollywood market were up nearly a half-point to 6 percent as the area gave back space. Still, vacancies stayed a whopping 5 points below the Los Angeles County average during the third quarter, according to Grubb & Ellis Co.

Class A asking rents managed to climb 2 cents, bringing the rate to $3.97, 25 cents more than the same period a year ago. Class B rents fell a penny to $3.27, but remained more than 70 cents higher than rates during third quarter 2007.

Tenants with a focus on entertainment, marketing and advertising are still looking for small pockets of less traditional office space, and they can find it in Hollywood.

“I think it’s one of L.A.’s stronger markets. Anytime you have smaller creative spaces they’re going to be in demand,” said Carle Pierose, sales and leasing division director, Charles Dunn Co. “I get calls from people who want high ceilings, exposed brick, a converted warehouse, and that just doesn’t exist in a lot of other markets.”

While plenty of new retail, residential and hotel space has come on line in Hollywood in recent years, the office market hasn’t received much in the way of new offerings, helping to keep it tight. The area also boasts lower rents than Westside markets.

“I’ve moved tenants out of Santa Monica and other markets and into Hollywood, but there just isn’t a ton of space and that kind of props up the market,” said Pierose. “Landlords still aren’t giving a ton of concessions yet.”



MAIN EVENTS

– The American Musical and Dramatic Academy signed a 12-year lease valued at more than $13 million for an entire 1928 Hollywood apartment building that was recently renovated. The school, which has a campus in New York, will use the building at 6400 Franklin Ave. as a dormitory for 150 students. It also leased the adjacent parking lot and took occupancy of the property in August. Capital Foresight owns the property.

– Sports apparel and footwear maker Adidas leased approximately 4,500 square feet of office space at 1604 Cahuenga Blvd. from Hollywood Media Center LLC for five years. The company will pay the asking rent of $2.85 per square foot, modified gross, with 4 percent annual increases.

– Interior design firm Nickey-Kehoe inked a four-year sublease for 1,480 square feet of quasi-retail space at 732 Highland Ave. The tenant will pay Look-Link Inc. $2.25 per square foot triple net with 4 percent increases, according to Charles Dunn Co., which brokered the deal.

– NF Hawaiian Gardens LP purchased the Kingsley Drive Towers at 737 S. Kingsley Drive from StarPoint Properties LLC for $17.4 million. The property, with 83 apartment units, was renovated last year.

– Nearby, 1746 N. Kingsley LLC acquired a 17-unit apartment complex at 1746 N. Kingsley Drive for $2.75 million. The property was sold by 1746-1750 & #733; North Kingsley Drive LLC.



Office Market At a Glance

Inventory: 3.73 million square feet

Under Construction: 400,000 square feet

Asking Rents: $3.97

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