City's east side shows signs of shaking off dot-com hangover.

CONSTRUCTION sites are filling in the craters left in eastern Santa Monica by dot-bombs.

Commercial and residential developers are flooding the largely industrial area north of the Santa Monica (10) Freeway near the Los Angeles border, taking advantage of a market they perceive as being on the verge of rebounding from three years of bad news. And they have been joined by a rash of large commercial lease deals spurred by falling rents.

"In the next three years, we expect there'll be a mix of new product--either retail, more apartments or post-production space," said Doug Holte, partner at real estate developer Hines, who hopes to have city approvals for another 194,000 square feet at its 330,000-square-foot Lantana Media Campus this summer.

At Broadway and 26th Street, Tishman Speyer Properties is putting the finishing touches on the $15 million renovation of its 1.2 million-square-foot Colorado Center office complex.

Further east, developers are planning a 145-unit residential project at Roberts Business Park, and the Santa Monica Studios site on the north side of Olympic Boulevard near Stewart Street is being eyed as a possible mixed-use site.

Just as important is the activity in the area's Class-A office market. Fueled by declining rents and hope of expansion, the market has shown signs of rebounding.

Office vacancy rates topped 25 percent in early 2001, according to Rick Buckley, senior vice president at CB Richard Ellis. That began to change as landlords brought down rents that had been the county's highest during the heyday of high-tech. The reductions were prompted, in part, by large amounts of sublease space that flooded the market and hit new buildings like Water Garden and Arboretum Courtyard.

Now, the market is down to a very healthy level, hovering around a vacancy level of 10 percent largely as a result of entertainment related firms moving in where tech firms moved out.

With the office market tightening up, residential developers are poised to take advantage of a Santa Monica residential market where average apartment rents and condominium sales prices are among the highest in the county.

A 30-unit condo building is being proposed on Broadway just west of 20th Street, an 18unit live-work loft building is nearing completion a block south and the Santa Monica Studios site is in play as a location for a mixed-use project.

The bump in residential supply would mark yet another transition to the area roughly bordered by 20th Street and the L.A. city line to the east and west, and Broadway and the freeway to the north and south.

Originally part of the transportation corridor running along the Exposition Boulevard rail lines from downtown to the coast at the turn of the 20th century, the neighborhood became a defense manufacturing center when Douglas Aircraft bought much of the land in the 1940s.

By the 1970s, when Douglas began selling off much of its property, many of the warehouses were being converted to entertainment production facilities.

The area's first phase of Class-A office buildings were constructed between 1984 and 1991, when the first stages of then-MGM Plaza and Water Garden were constructed. The area had its most substantial building boom just before the dot-com rush; Water Garden's second phase, Arboretum Courtyard, Gateway and most of Lantana were completed between 1999 and 2001.

"Santa Monica is inexpensive today relative to the last turn," said Ian Strano, senior vice president at Lee & Associates, "and media companies are driving that marketplace."

Indeed, in the past year, media businesses have taken more than 325,000 square feet in the area.

"Part of the draw is that entertainment firms are not necessarily going to find a tech firm's improvements 100 percent useless," said Buckley, leasing representative for the 300,000-square-foot MTV Building at Colorado and 26th Street. "They're going to want some type of flair to the space."