Office rents rising again as vacancy rates decline.

The Westside office market furthered its almost two-year-long resurgence in the second quarter, with vacancy rates continuing to shrink and rants edging higher. Some real estate observers are even declaring certain neighborhoods "landlords' markets."

During the first half of the year, "the rules of lease negotiation 'changed" as premium office space became scarce in choice submarkets, said Gerald Porter, president of Brentwood-based brokerage Metrospace Corp.

He said it's now common in the popular submarkets of Santa Monica, Westwood, Beverly Hills and Century City for a competing tenant to lease space right out from under another bidder during negotiations.

"We advise our clients to relax their requirements, respond quickly and have alternate properties in mind," Porter said.

Santa Monica has the lowest office vacancy rate on the Westside - 9.3 percent. Westwood, Beverly Hills and Century City are all posting rates in the low teens.

"Those are the growth-engine submarkets for the area," said Rosey Miller, senior vice president at Grubb & Ellis Co. He noted that those areas continue to lure entertainment and high-tech companies, which in turn attract numerous smaller businesses to service them.

Rents in Century City are up 20 percent this year, said Cliff Goldstein, a partner at Miracle Mile-based developer J.H. Snyder Co. But Century City recently has been in the news more often due to its sales activity than its leasing agreements.

An investment fund managed by a J.P. Morgan & Co. affiliate. purchased the 2 million square-foot Century Plaza Towers for a reported $480 million in a deal that closed two days into the second quarter. Then in June, billionaire Marvin Davis bought back Fox Plaza for the near-record price of $400 per square foot, or $302 million.

The tightness in the stronger submarkets has benefitted some adjacent submarkets. Culver City and West Los Angeles both have seen their office vacancy rates drop by more than 2 points over the past year.

But the Hollywood/West Hollywood and Miracle/Park Mile submarkets continue to lag, with about one-fifth of the rentable office space in both areas sitting vacant. And Hollywood's vacancy rate has been creeping higher this year.

"There are still a lot of issues with age, size and safety in that area," said Scott Katcher, a broker with Julien J. Studley Inc. "Only time will turn it around."

Katcher specifically pointed to rising rents in other Westside submarkets and completion of the Metro Red Line subway as two factors that will eventually help Hollywood's office market to recover.

As for the Westside's stronger pockets, major construction activity is about to occur, providing more evidence of the area's recovery. The last time the market saw new development was 1993, when builders broke ground on the 28,000-square-foot UPN Building at the 11800 Wilshire Building in Brentwood and the 75,000-square-foot 808 Wilshire Building in Santa Monica, according to Harry Bateman, a researcher at Grubb & Ellis. By the end of this year, both the 125,000-square-foot Arboretum Courtyard and the 660,000-square-foot phase two of the Water Garden are scheduled to break ground.

Meanwhile, the 1,087-acre Playa Vista project finally appears to be getting back on track after teetering on the brink of collapse through much of the second quarter. The mortgage-holding investment group as of last week was still negotiating a deal with developer Robert Maguire that would allow the first phase of the huge project to break ground.

Not everyone thinks the Westside market is recovered yet. Howard Sadowsky, executive vice president of Julien Studley, noted that while available Class A office space is sparse, there is ample Class B and C space available. He also said the San Fernando Valley and downtown L.A. markets provide attractive alternatives, pointing out that Princess Cruises is relocating to Valencia after having outgrown its Century City location.

Sadowsky predicted the Westside might become a sellers' market by next year, but until then, "it's healthy to see it as it is, not as we'd like it to be."