Rents, property values high as condo development continues.

OFFICE-to-residential conversions and mixed-use projects ate into available office space in Hollywood in the first quarter, keeping rents and land values high.

The tight market has driven asking rates for Class A rentals to $2.89 a square foot, up from $2.54 the previous quarter and up 43 cents from a year ago. First quarter vacancy rates at Hollywood office buildings were at 11.3 percent for the quarter, inching up from 11 percent in the previous quarter but far below the nearly 20 percent vacancy rate three years ago.

"Basically, we've got a very active market, said Christopher Bonbright, chief executive of Ramsey-Shilling Commercial Real Estate Services. "It's very tight."

Bonbright said that commercial tenants would continue to come to the area since it is geographically desirable and cheaper than Westside cities.

"What alternatives do they have?" Bonbright asked. "Generally, people are coming here because it's relatively less expensive than markets may be in other areas, particularly the Westside and Santa Monica, where prices are 30 to 40 percent higher."

Mixed-use conversions, like the one in progress at the 180,000-square-foot building at 7060 Hollywood Blvd., are adding to the office squeeze. A 2-acre former parking lot at the corner of Vine and Selma also is slated for mixed use, including 300 apartments and a Whole Foods Market.

More than 2,500 residential units are set to come online along the Vine Street corridor, according to the Hollywood Entertainment District Business Improvement District. Members of the Hollywood Chamber of Commerce expressed concern about the disappearance of pure commercial space and have started lobbying to protect Hollywood's remaining office buildings.

"We'd like some of the developers considering residential (conversion) to include in their projects some type of office component," said chamber member Brian Folb, a principal at Paramount Contractors and Developers. "We love the fact that Hollywood is becoming a residential area and see benefits of that, but we want to retain out core business, which is the entertainment industry. That's driven a lot of the economics of Hollywood over the years."

Bonbright said that he expected the residential conversions to slow significantly.

"All the logical conversions have been completed and politically it will also be difficult to continue," Bonbright said. "The planning people and officials are all saying we have enough residential and don't want to lose any more office space--that's our core."

But not all Hollywood officials are concerned about residential overtaking commercial development.

"We at the entertainment district are quite excited about influx of residential life in the district," said Kerry Morrison, executive director of the entertainment district BID. "It will solidify this area as one of great urban neighborhoods and help support retail development."

Non-residential deals

In February, the owners of the Los Angeles Film School and the Los Angeles Recording School bought the 100,000-square-foot Klasky Csupo building at 6353 Sunset Blvd. for $40 million, or about $400 a foot.

The Academy of Motion Pictures Arts & Sciences has been acquiring property for a Hollywood movie museum, expected to cost more than $200 million to build. The 75,000-foot structure will be built along De Longpre Avenue near Vine Street and Cahuenga Boulevard.

The Academy has already agreed to buy a 77,000-square-foot site on Homewood Avenue, now the site of a post-production facility, and intends to acquire five other parcels on the block. Academy officials expect to break ground in 2008.

With little new office space on the horizon, rents and occupancy levels could continue to rise, Bonbright said.

The price nm-up has led property owners to put some notable sites on the market.

Hollywood-based CIM Group is close to a deal to buy the 75,000-square-foot Security Pacific building at the northeast corner of Hollywood Boulevard and Cahuenga Avenue from the Bolour Trust for $16 million, or $213 a foot.

Major Events:

* The Los Angeles Film School and the Los Angeles Recording School bought the 100,000square-foot Klasky Csupo building at 6353 Sunset Blvd. for $40 million, or about $400 a foot.

* The Academy of Motion Picture Arts & Sciences has been acquiring property for a Hollywood movie museum, expected to cost more than $200 million to build. The 75,000-square-foot structure will be built along De Longpre Avenue near Vine Street and Cahuenga Boulevard.

* CIM Group is near a deal to buy the 75,000-square-foot Security Pacific building at the northeast corner of Hollywood Boulevard and Cahuenga Avenue from the Bolour Trust for $16 million.