Santa Monica Least Showbiz Office Market
In mid-May, CBS Television Distribution inked a five-year, $15 million lease for 53,000-square-foot offices at the Water Garden in Santa Monica. And in Santa Clarita, the facility that CBS Television Studios leases to film NCIS is for sale at $18.4 million. Brokers say demand for creative space is highest on L.A.'s Westside. "It felt like a little bit of a pause back in December, but it has picked up, and there has been a real increase in deal activity," says broker Jim Jacobsen of Industry Partners, adding that downtown Santa Monica is most popular. In the 17.7 million-square-foot creative Westside market -- including Santa Monica, Culver City, Marina del Rey and Venice -- the vacancy rate was 12 percent in the first quarter, down from 15.5 percent a year earlier, according to Industry Partners. Sources say Hulu, Miramax and Demand Media are looking for space or nearing deals in the area, yet despite the increased demand for creative space, rents essentially have remained flat. The average asking rate in the first quarter was $3.04 per square foot a month, down from $3.11 a year earlier. Because of the recession and strict rules about development, few new high-quality office properties have been built to satiate growing demand. That makes desirable sites attractive to investors, says Cushman & Wakefield executive vp Carl Muhlstein, who is co-representing San Francisco investor Merlone Geier Partners in its $89 million sale of an 11.5-acre property at Olympic Boulevard and Bundy Drive to Hudson Pacific Properties, owner of Sunset Gower Studios. Hudson plans to remodel the existing building and convert it to a roughly 250,000-square-foot creative office campus. The mini-boom has enticed even nontraditional landlords to get in on the act. George Schlatter, the TV producer known for Rowan & Martin's Laugh-In, is converting a 40,000-square-foot warehouse property he owns in Culver City into a creative office building. Says Schlatter, "We haven't even advertised it yet, and everyone seems to be calling."