Apparent Westside revival of late 1992 runs out of gas in early '93.

While the Westside office market seemed to withstand the market downturn in 1992, first quarter 1993 gave brokers a dose of cold reality.

Net absorption, which measures the amount of space occupied in a given quarter minus the amount of space vacated, fell dramatically from 139,000 square feet in fourth quarter 1992 to 25,478 square feet in the first quarter of 1993, according to commercial brokerage firm Grubb & Ellis Co.

"The big surprise in the first quarter was net absorption," said Rosey Miller, vice president in the Westside office of Grubb & Ellis.

Miller said the Westside really appeared to be hitting a turning point when it ended 1992 with a net absorption of 1 million square feet. "Starting off the year with this quarter being so low means a lot of catch-up will have to be done," he said.

The Westside market encompasses the eight submarkets of Beverly Hills, Brentwood, Century City, Hollywood/West Hollywood, Marina del Rey/Culver City, Santa Monica, West L.A. and Westwood.

The Westside's overall vacancy rate of 19.0 percent was up a half point from its fourth quarter rate, according to Grubb & Ellis.

Most of the activity in the first quarter was done in the form of lease renewals and negotiated restructurings with landlords, said Miller. Negotiated restructurings involve tenants with two to three years left on their leases negotiating with landlords for lower rates.

The biggest lease deal of the quarter involved SunAmerica Corp., formerly Broad Inc., which plans to move from Brentwood and take up 104,000 square feet for 10 years at 1999 Avenue of the Stars, Century City's newest highrise. The lease deal for that financial services company included Century City's first deal to allow a corporate sign on top of a building. The 785,000-square-foot tower will be known as SunAmerica Center.

As a sign of the times in the Westside commercial real estate market, a Newport Beach-based company specializing in foreclosed property sales opened an office in West L.A. in February.

Mark Van Ness, founding partner of Sperry Van Ness, told the Business Journal that his company's existing client base brought him to West L.A. Most of his clients, incidentally, are lending institutions seeking to dispose of foreclosed L.A. commercial properties.

Van Ness told the Business Journal that he has seen "no indication that values will improve this year."

Westside brokers confirmed that more foreclosed properties are expected to hit the market in the remainder of 1993.

"A number of buildings have been in trouble for a while," said Howard Sadowsky, executive vice president and regional manager of the commercial real estate brokerage Julien J. Studley Inc. "Landlords expected the market to respond quicker and, since it hasn't, buildings are not bouncing back quicker."

He said he knows of at least five or six buildings that are "experiencing complications," meaning developers don't have the money to service their loans.

One of the more high-profile properties to be foreclosed on in the first quarter of 1993 was the Century City ABC Entertainment Center, which houses the West Coast brass of Capital Cities/ABC, the Shubert Theatre and the multi-screen Cineplex Odeon movie house.

The 585,000-square-foot landmark property consists of twin six-story office buildings and a retail plaza located at 2020 and 2040 Avenue of the Stars.

Although the center was 97 percent leased at the time foreclosure procedures were initiated, Westside Entertainment Center Associates -- the investment group which acquired the ground lease for the property -- was six months behind in its payments on the loan, said Alan Wayte, an attorney representing the lender consortium that initiated foreclosure proceedings.

Foreclosed buildings on the Westside are typically being purchased for 60 to 65 percent of replacement value, noted Grubb & Ellis' Miller. Most of the foreclosed Westside buildings are being purchased by users, not investors looking for rock-bottom deals, he said.

As a sign of the strength of the Westside market, brokers pointed to the relatively high rental rates many office buildings are commanding.

Sadowsky said some Class A buildings in Santa Monica are getting annual rates of as much as $30 to $40 per square foot, while good Class B buildings that are asbestos-free are getting $23 to $24 a square foot.

In the first quarter tally for the Westside submarkets, Brentwood fared the best, posting almost 101,000 square feet in net absorption, according to Grubb & Ellis. Century City was the hardest hit, with a negative absorption of 86,000 square feet and Santa Monica was the next hardest hit with 74,000 square feet of negative absorption.

As for the future, Sadowsky of Studley said he predicts a quiet, gradual absorption of space with no "big thunder" for the rest of the year.

"We will come out of this in a very quiet way," he said.