'Edgy' Tenants Moving In, Raising Property Values.

HOLLYWOOD'S renaissance gained altitude in the fourth quarter, with a growing number of small "edgy" tenants moving into the area, major development projects progressing, commercial property values and rents rising, and ridership on the newly opened subway leg increasing.

"We're getting a lot more calls from developers and people interested in buying property and moving into Hollywood, because major owners and developers are making major inroads," said Donna Hemer, Hollywood project manager for the L.A. Community Redevelopment Agency. "The other reason is because the transportation system is in place in Hollywood."

Last spring saw the Metro Red Line station open at Hollywood and Vine, and this spring, the Hollywood/Highland station is set to open.

"That is making a big difference, and has helped the Vine Street area," Hemer said. "Rents are being raised, and property prices are going up."

For the fourth quarter, Hollywood's office vacancy rate fell to 17.9 percent from 23.1 percent for the previous three months, according to Cushman Wakefield Inc. Accordingly, the average monthly asking lease rate rose to $1.63 per square foot, from $1.57 in the third quarter.

Much of the action came from small tech companies, which are being drawn by Hollywood's lower leasing rates and a certain sense of edginess not available in a lot of other areas of town.

"Hollywood is probably the strongest single location for techies right now," said Rob Langer, partner at Meringoff Equities, one of the largest commercial landlords in Hollywood. "We thought the majority of tenants would be entertainment But there's been a huge demand for dot-coms, and the employee base they're looking for is young, edgy-type people, who, if they lived in New York, would probably live in SoHo or Chelsea. They like the ambiance -- the clubs and the restaurants in Hollywood."

Langer said he is most excited about Meringoff's fourth-quarter acquisition of The Ivar Campus, at 1741 N. Ivar, a two-building, low-rise, exposed-brick campus that he describes as "high-end funky space close to the Hollywood Freeway."

When the complex was first put up for lease in November, there was virtually no interest from tenants. But while space has yet to be leased there, Langer said he has been averaging three or four tenant showings a day since the New Year's weekend.

"I think the dot-com companies like looking for something more funky -- they don't want the drop-ceiling, two-by-four tiles," he said.

Steven Tronson, an associate at Ramsey-Shilling & Associates, confirmed that a lot of smaller lease deals (5,000 to 15,000 square feet) are being done in what he calls "little creative buildings." Many of those buildings are on side streets, which tenants previously had shunned due to security concerns.

"This is a good sign," Tronson said. "That security has improved even off the Boulevard and people are willing to move in."

The action is not limited to small buildings. Meringoff has had some success in cutting deals at the CNN building, which it purchased last September for $24 million. It was 85 percent occupied at that time, but is now 98 percent occupied, Langer said.

Some of the larger high-tech tenants have even removed the drop-ceilings on their floors, exposing the between-floor ductwork and thereby creating what he calls "a warehouse converted ambiance."

Tronson said he is working with a developer who plans to announce later this month a major renovation of a "100,000-square-foot architectural landmark on Hollywood Boulevard," which he declined to specify. The building is being positioned to attract Internet companies, he said.

The surge in activity is prompting landlords to postpone long-term commitments for ground-level retail spaces until after the new mega-developments start coming on line.

"No landlord in Hollywood is extending leases more than month-to-month on the retail spaces," Langer said. "The retail rates are going up so fast and so hard that although Hollywood and Vine Plaza is 100 percent leased in terms of office space, we created the vacancies in the ground-floor retail spaces."

As for mega-projects, the most significant events occurred at Regent Properties' $70 million Hollywood Marketplace project. A lawsuit that had threatened to sink the project was settled, and Regent closed on the acquisition of the main part of its project site.

Also during the quarter, the city of Los Angeles in December approved plans by Pacific Theatres to build a 175,000-square-foot entertainment center around the Cinerama Dome on Sunset Boulevard. Work on the $60 million project is expected to start this spring. The project is already 80 percent preleased and designed to have a multiplex theater, restaurants and retail shops.

Hollywood's granddaddy project, TrizecHahn Corp.'s $385 million Hollywood & Highland, is progressing smoothly, on track for its scheduled opening in 2001. The developer has made no leasing announcements since the project's groundbreaking in October 1998, but still plans to include Hollywood-oriented retailers, restaurants, a jazz club, a 640-room hotel, a 3,300-seat theater that will be home of the Academy Awards and live studio facilities.

Hollywood

Major Events:

* The American Academy of Dramatic Arts moved from Pasadena to the old A&M Records property.

* Regent Properties settled a parking-related lawsuit that threatened its $70 million Hollywood Marketplace project.

* Archon Group purchased the 21-story Sunset Media Tower at 6255 Sunset Blvd. for about $42 million.

* The city of Los Angeles approved plans by Pacific Theatres to build a $60 million, 175,000-square-foot entertainment center around the Cinerama Dome on Sunset Boulevard.