Glimmers of hope as vacancies decline in some pockets. (Real Estate Quarterly--Westside).

Westside real estate continues to inch its way back from the dismal days of the dot-com implosion. But the trip is a long one, and despite gains in some pockets, there were retreats in others.

The broader Westside vacancy rate dipped slightly in the first quarter, to 15.5 percent from 15.8 percent in the pervious period, led by gains in Santa Monica and Culver City.

Average asking rates for Class-A space fell again in the first quarter, to $2.84, a drop of 2 cents from the previous period and of nearly a dime from the year-ago quarter, according to Grubb & Eilis Co.

The falling rates had their positive effect, however, as net absorption, (the amount of space newly occupied less the amount newly available) rose sharply to 274,432 square feet in the first quarter from 49,953 square feet in the fourth quarter. Both figures were significantly better than the negative 558,523 logged in the first quarter of 2002.

"Landlords are working harder than I've ever seen in my 18-year career," said Neil Resnick, a broker for Grubb & Ellis. "They're being extraordinarily proactive in trying to secure tenants, some issuing unsolicited offers when they hear tenants are on the market."

Taking advantage of the competitive rates, attorneys Stutman Treister & Glatt are taking 26,000 square feet in a 10-year, $9 million deal at 1901 Avenue of the Stars in a move from 3699 Wilshire Blvd. Other lease activity included Bob Bain Productions' lease of 6,250 square feet at $2.30 per foot for five years 'at 1447 Cloverfield Blvd. in Santa Monica, and Macaroni Grill's 7,000-square-foot lease for $1.9 million at El Segundo's Atrium.

Despite those gains, there were space give-backs.

Beverly Hills saw its vacancy rate climb half a point, to 13.2 percent for the period; Brentwood vacancies were up 1.5 percent, to 11 percent, as was Westwood, which hit 21.4 percent. Of those markets, only Beverly Hills saw positive net absorption.

Market drivers

Two trends are driving the Westside market, according to Marc Lebowitz, who represents landlords for First Properties: early renewals and big tenant improvement packages.

"Early renewals are the hot button for every smart owner in the city, even if they're a year or more out," he said.

Several Westside deals bear that out. In Brentwood, Australian shopping center developer Westfield Group renewed its 78,750 square foot lease on its U.S. headquarters and took an additional 7,585 square feet at the World Savings Building, 11601 Wilshire Blvd.

Pardee Homes, which had 16 months remaining on its lease at 10880 Wilshire Blvd., renewed its 36,000-square-foot lease for 10 years at $14 million.

Elsewhere, Westcap Investors reduced its rent in a 6-year, $3 million deal at 11111 Santa Monica Blvd. in West L.A.; and Karl Storz Endoscopy America Inc., locked in 62,400 square feet in a 75-month deal worth about $8.5 million at 600 Corporate Pointe in Culver City.

"Tenants continue to look at early renewals as a viable alternative to relocation," Resnick said. "Landlords who've had qualified tenants don't want to lose them and will work harder to maintain them.

Landlords also lure tenants with rich tenant improvement packages, which, if unused, are translated into discounted rents. "I see lot of tenants taking $30 to $35 in TIs, but only using part of it," Lebowitz explained. "The rest is used as a rent credit."

Two deals in Century City illustrate the point Attorneys Fonda & Fraser took 10,000 square feet at 1880 Century Park East in a 5 year deal at $2.70 per square foot with a $35 per square foot TI allowance. At 1901 Century Park East, law firm Rosenfeld Wolff Aronson Klein leased 10,000 square feet at $2.65 per square for five years with a TI of $30.

"Investment activity has been remarkably brisk," said Bob Safai, a partner at Madison Partners. "As long as interest rates stay low, people are happy to invest in real estate -- and not just pension funds or REITs. There are a lot of exchange buyers out there."

Exchange buyers are typically high-net-worth individuals or family trusts that following the sale of a property have to reinvest relatively quickly to avoid a big tax hit.

First quarter deals included two deals for Equity Office Properties in Santa Monica. EOP sold its 7-story, 125,715-square-foot mixed-use Janss Court building at 1453 3rd St for $36 million and its 94,000-square-foot Commerce Park office park at Centinela Avenue and Olympic Boulevard for $16 million.

In Westwood, Jamison Properties, owners of two dozen buildings in Wilshire Center, bought the 3-story, 5.7,945-square-foot building at 1990' Westwood Blvd. for $7 million from Stanley Shuster.

The activity is a double-edged sword, said Safai, who brokered the Janss Court deal. "The low rates are working against us," he said, as buyers snap up good properties quickly, leaving slim pickings for late-comers.

RELATED ARTICLE: Major Events: * Equity Office Properties sold the mixed-use Janss Court project at 1453 3rd St. for $36 million and its Commerce Park office park at Centinela Avenue and Olympic Boulevard for $16 million.

* Bob Bain Productions leased 6,250 square feet at $2.30 per foot for five years at 1447 Cloverfield Blvd. in Santa Monica.

* Karl Storz Endoscopy locked in 63,940 square feet for 6 years at $8.5 million at 600 Corporate Pointe.

* Westfield Group renewed its 78,750 square foot lease on its U.S. headquarters' and took an additional 7,585 square feet at the World Savings Building, 11601 Wilshire Blvd.

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