Boing! TMZ Joins L.A.'s 'Straight Out of 2006' Westside Real Estate Rebound

This story first appeared in the March 9 issue of The Hollywood Reporter magazine.

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The entertainment office market in Los Angeles is in the midst of a big comeback after several years of stagnation. Just ask Warner Bros., which recently struck a $20 million, 11-year lease in Burbank for its television marketing division and is nearing a deal for TMZ's new Westside headquarters.

The marketing division that promotes Warners Bros. Television series will move into the new Worthe Real Estate Group-owned offices at 4411 W. Olive Ave. in the summer. And Warners-owned celebrity news organization TMZ is in final negotiations to sign a $15  million lease for 36,000 square feet of space at a former post office distribution center at 13031 W. Jefferson Blvd. in Los Angeles near Marina del Rey. The 10-year deal with owners Worthe and Shorenstein Properties is expected to be finalized in March.

Commercial real estate experts say growth in the technology sector and a lack of new office space has driven up prices and sent vacancy rates tumbling. "It literally is like circa 2006 all over again," says Jim Jacobsen of commercial real estate brokerage Industry Partners. "And 2006 was fantastic."

The Westside, in particular, has been booming. According to Industry Partners data, the vacancy rate for creative space in the area -- which includes Santa Monica, Culver City, Marina del Rey and Venice -- was 12.7 percent in the fourth quarter, down from 16.1 percent a year earlier. That compares favorably with the general office market in Los Angeles County, which had a vacancy rate of 21.3 percent in the fourth quarter (it was 19.6 percent a year earlier).

Carl Muhlstein, executive vp at commercial brokerage Cushman & Wakefield, says the improvement in the West Los Angeles submarket can be attributed to growth by local companies and the success of Bay Area-based tech firms. "Los Angeles is becoming a catcher's mitt for Northern California," he says.

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On Feb. 21, YouTube closed an 11-year lease for a 41,000-square-foot office building at 12475 W. Bluff Creek Drive in Playa Vista that will serve as the L.A. outpost of the site's Next Lab, a facility where YouTube partners can shoot and edit videos. The deal was with Los Angeles-based real estate developer and investor Ratkovich Co., owner of the Hercules Campus, the multi-building development that includes YouTube's new digs. 

And there are several high-profile entertainment, media and technology companies in the market for space, including Universal Music Group, Digital Domain Productions and Demand Media. Despite the lower vacancy rate for creative space in West Los Angeles, rents have remained flat. The average cost of creative space in the fourth quarter was $3.06 per square foot per month, down from $3.10 a year earlier.

But Jacobsen says that in select locales such as parts of Santa Monica, rents are approaching $5 per foot. "That is just straight out of 2006," he says. "The difference is, in 2006 you didn't have a lot of demand drivers, and you had new space being created. This time there is very little new space."

Email: Daniel.Miller@THR.com

Twitter: @DanielNMiller

(Below: TMZ's future offices at 13031 W. Jefferson Blvd.)