Ka-Ching! Santa Monica Office Space is Hollywood's Hot Ticket
Creative space by the beach is at a premium as CBS Television Distribution inks a $15 million lease there.
This story originally appeared in the June 8 issue of The Hollywood Reporter magazine.
How active is L.A.'s entertainment office real estate market? Just ask CBS.
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 commercial real estate brokerage 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 Carl Muhlstein, executive vp at commercial real estate brokerage Cushman & Wakefield, 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. The deal is expected to close in August.
West Los Angeles-based Hudson, owner of Sunset Gower Studios and Sunset Bronson Studios, plans to remodel the existing buildings on site and convert the property 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."