Desire for upscale addresses keeps squeeze on vacancies.

VACANCY rates on the Westside continue to slide as tenants eager for a ritzy postmark or proximity to other creative companies snapped up available space.

With only 3.3 million of the market's 41.5 million square feet of office space on the market, Los Angeles' Westside remains the tightest real estate market in the county. Vacancy dipped to 8 percent in the opening period of 2006, a significant rebound from the 16.6 percent recorded in the same period in 2004, according to figures from Grubb & Ellis Co. Beverly Hills (6.1 percent) and Santa Monica (6.3 percent) are the tightest of the market's six segments.

"As vacancy rates drop, you'll see spikes on rent," said Bob Safai, a principal with Madison Partners, who predicts a 10- to 15-percent increase this year. "There's finite real estate on the Westside, there are no cranes in the air and there's a high velocity for absorption."

Those factors have already helped raise asking rates for Class A properties 15 cents from year-end to $3.05 per square foot. Class B space also jumped 15 cents, coming in at $2.78 per square foot, up from $2.63 in the previous quarter. Those figures are significantly better than the $2.70 and $2.31, respectively, reported in the first quitter of 2004.

Santa Monica

"Space is flying off the shelves, even Class B and Class C," Gabbaian notes. Overall vacancy dropped from 7 percent in the fourth quarter to 6.3 percent in the first. "If you look at just Class A, vacancy is probably 2-4 percent."

As a result, average asking rates for Class A space catapulted to $3.94 per square foot in the opening quarter, up 46 cents over the final quitter of 2005 and a whopping 80 cents over the first quitter of 2004. Class B rates also rose in the first quitter to $3.16 per square foot, up 17 cents from year-end and 71 cents from two years ago.

"We're seeing over $4 in the Yahoo Center and the Water Garden District," says Mark Robinson, corporate managing director for Studley. "Lantana has a 60,000-square-foot and a 120,000-square-foot building on the boards, but occupancy is limited by the special entertainment district. Still, they're currently throwing out $5 rental numbers for new product."

In Santa Monica's largest transaction, Lions Gate Entertainment Corp. signed a $13.4 million renewal and expansion of almost 54,000 square feet at 2700 Colorado Ave. The company now occupies 85,225 square feet there.

Beverly Hills

Office space is even tighter in Beverly Hills, where the vacancy rate dropped from 7.8 percent at year-end to 6.1 percent in the first quarter. Asking rates rose accordingly, with Class A space offered at $3.20 per square foot. 22 cents higher than in the previous quarter and 38 cents higher than a year ago.

With many tenants priced out of premier properties, landlords of Class B stock also raised-their lease rates. Average asking rates for these buildings increased 28 cents from the final quarter of 2005 to $3.10 a square foot, just slightly less than the top sites. That's a 42-cent gain from one year ago.

"The only large block in Beverly Hills is the CAA space at 9830 Wilshire Blvd., which is being selectively marketed," Resnick notes. "The uniqueness of that property makes a full-building user the only logical candidate."

A brief respite from the space crunch might come from the Crescent, J.H. Snyder Co.'s $50-million mixed-use residential and office property near Rodeo Drive. The development, which has 40,000 square feet of office space and 88 luxury apartments, opened late in the first quarter.

Market dynamics are prompting sales. Developer Alan Casden bas three of his Beverly Hills office buildings on the block. The Class A properties at 8942, 9090 and 9150 Wilshire Blvd. could go for about $55 million.

Culver City 

With few options for renters available, landlords in Culver City could be sitting pretty as companies seek to expand within or relocate to the Westside.

"Even a stay-in-place refurbishment will cost $30 per square foot," estimates Robinson of Studley. "If, on top of that, you've got a $4.25 asking rate, you have to consider if business profitability is critical to being in that building or if you can look at Howard Hughes, Miracle Mile or Culver City."

Vacancy dropped slightly from 8.4 percent at year-end to 7.3 percent in the first quarter.

Richard Schnell, senior vice president for Colliers International, expects to see a lot of owner-occupied properties as the year rolls on.

"People can buy little buildings down there and pay $300 per square foot for low-profile, single-purpose properties with parking," he notes. "That's very desirable. They're tired of high rents, and with low interest rates, it's cheaper to buy."

Major Events:

* Bank and asset management firm UBS renewed 34,000 square feet at 1999 Avenue of the Stars in a 10-year lease worth $16 million.

* Lions Gate Entertainment signed a $13.4-million renewal and expansion of almost 54,000 square feet at 2700 Colorado Ave.

* Developer Alan Casden put 8942, 9090 and 9150 Wilshire Blvd. on the block for $55 million.

* Broadway Real Estate Partners is selling the 12-story office building at 9701 Wilshire Blvd. and is expected to get $51 million for the 94 percent-leased property.