Potential Deals Could Break Westside Office Logjam.

THE Westside office market remains in a state of flux, as tenants and landlords actively try to come to terms with the vast amount of sublease space defining the market. The stalemate has arisen as landlords remain reluctant to drop asking rates and tenants refuse to commit at what they perceive to be high prices.

But several deals closing in on completion may herald an end of the logjam.

The roughly 2 million feet of sublease space that came onto the Westside market in the latter part of 2000 and early this year remain available, but deals are in negotiation and sources expect holes to start filling soon, including deals to fill roughly 71,000 square feet in Santa Monica.

Space at Arboretum Courtyard (35,000 square feet) and MGM Plaza (36,000 square feet), if filled, could be a welcome finger in the dike for the battered seaside community.

The negotiating environment is beginning to change, in part, because landlords, have started slicing asking prices as much as 25 percent to entice tenants to sign up, according to several Westside leasing specialists. Several sources declined to be quoted on the record for fear of influencing the market and betraying their clients.

Among the sites now under negotiation are those abandoned at Arboretum Courtyard by Broadband Sports when the company disbanded in February and Focus Media's former space at MGM Plaza.

The prized deal, though, and the space that epitomized the dot-com crash and signaled the end of the Westside real estate utopia, is at Kilroy Realty Corp.'s Westside Media Center.

When eToys Inc. went belly-up earlier this year, it left Kilroy with a 150,000-square-foot chasm at the same time the developer is finishing phase three of the office project. Fortunately, Kilroy has the luxury of $15 million in letters of credit it received from eToys to maintain revenue from the space.

The space could soon be filled, however, if negotiations work out with Warner Bros. Westside real estate sources said that Warner Bros. is interested in the eToys space - and maybe more of Kilroy's development.

Other deals reportedly in the works include two signed letters of intent that would gobble up 35,000 square feet of the 52,000 square feet that Sapient Corp. left at the Water Garden office complex.

Chris Houge, a managing director at Insignia/ESG Inc., said Westside players on both sides of the transaction are still trying to sort through their next steps. With no deals getting done, there are no guidelines for how to proceed.

"We are in a turbulent environment and nobody knows where the market is right now because of the lack of evidence," Houge said.