The Hollywood-area office market spent most of 2008 hanging tough, with vacancies remaining a solid five points below the Los Angeles County average even as the economy tanked. But that resilience faded during the fourth quarter as vacancies rose more than four points to 10.6 percent.
The West Hollywood submarket holds most of the responsibility for the vacancy uptick, while Hollywood proper has remained in much better shape thanks to its reliance on entertainment tenants, according to John Tronson, principal, Ramsey-Shilling Commercial Real Estate Services.
“They’re two dramatically different markets,” he said. “You have a much broader tenant base in West Hollywood with traditional business services like mortgage companies and financial institutions all of which have been destroyed in the last six months.”
The combined markets gave back 38,103 square feet during the quarter, as Class A rents dropped a nickel, according to Grubb & Ellis Co. Tronson said that he’s fielded several calls in recent weeks from landlords whose tenants are having trouble making rent. While a few of the occupants may end up evicted, the majority of them will stay put with a bit of assistance.
“Some of the smartest landlords I know are concerned about 2009 and 2010,” he said. “Now is not the time to drive up the rates and hold out for a big number. It’s a smart time to make sure you have a ‘butt on the bar stool,’ as we say. It’s better to be selling a 99 cent draft and have somebody buy it than have nobody buy your $10 martini.”
Office Market At a Glance
Inventory: 3.9 million
Under Construction: 400,000 square feet
MAIN EVENT
– Thompson National Properties LLC of Irvine scooped up the 102,800-square-foot Kodak Hollywood Campus from Eastman Kodak Co. for more than $31 million, or nearly $306 per square foot. For more than two decades, Eastman Kodak has been the sole tenant of the property, which includes a three-story office and production facility at 1017 N. Las Palmas Ave. and an 18,850-square-foot office building at 6700 Santa Monica Blvd.
– Entertainment marketing firm Trailer Park signed a 10-year, 60,000-square-foot lease at 6922 Hollywood Blvd., better known as the TV Guide building. The tenant already occupied the two lower floors at the 12-story property, owned by CIM Group Inc, and will take over the top two floors from TV Guide, which was sold and has moved out. Terms of the deal were not disclosed, but the transaction was said to be worth $27.5 million.
– 6417 Selma LLC inked two leases in the Marion Building on Cahuenga Boulevard in Hollywood. The first lease, at 1605 Cahuenga, is a 10-year deal for the entire 6,000-square-foot second floor of the building at a rate of $2 per square foot. The second lease is also a 10-year-deal and includes 3,000 square feet of the ground floor of the 1603-1607 Cahuenga building at a rate of $3 per square foot. 6417 Selma LLC plans to build a Marriott Hotel nearby. The space on Cahuenga will be used for offices, conference rooms, a restaurant and fitness center for the future hotel.
– Construction continued last quarter on the Red Building, the final phase of West Hollywood’s Pacific Design Center. When completed, the Red Building will include 400,000 square feet of office space split.
Class A Asking Rents: $3.92
