Vacancies rise as market waits for expansion to boost demand. (Real Estate Quarterly Westside).

THERE remains plenty of room for growth on the Westside, but until the economy ratchets up, most of the activity will be in the form of musical chairs.

The submarket continues to suffer, as more tech and entertainment companies close, downsize or consolidate. The fourth quarter vacancy rate was 15.8 percent, up slightly from 15.4 in the third quarter and 13.6 percent at year-end 2001.

Net absorption (the amount of space newly occupied less the amount newly available) slumped to less than 50,000 square feet from better than 200,000 in the third quarter, though still significantly better than the negative 823,037 logged at year-end 2001.

"The key is companies hiring people again," said Mitch Stokes, partner with Madison Partners. "Until that happens, it will be tenants moving from one building to another without any real positive effect on absorption."

Average asking rates fell slightly to $2.86 per square foot from $2.90 in the previous three months and $3.07 at year-end 2001.

Brentwood remained one of the most competitive sectors on the Westside, with average Class-A rents reaching $2.91 from $2.85 per square foot in the third quarter, but still lower than the $3.04 for the fourth quarter of 2001. Brokers said landlords along San Vicente Boulevard quoted $3 or higher.

"It all comes back to location," Stokes said. "People are willing to pay higher rents to be in Brentwood." Brentwood's 9.5 percent vacancy rate, down from 11.2 percent in the July-September period, is the lowest in the county.

The largest deal of the quarter was the 20,000 square feet taken by the U.S. General Services Administration in the Wilshire Bundy Building. Total consideration for the 10-year deal was around $7.5 million.

Elsewhere, accounting firm Bemel & Ross took 7,000 square feet at 11601 Wilshire in a five-year deal for $2.81 per square foot. Lowe Entertainment sold 11600 Wilshire to Jamison Properties for $14 million.

In Beverly Hills, asking rates climbed 15 cents per foot, to $2.97 in the fourth quarter, even as vacancy rates nudged up to 12.7 percent from 12.5 percent in the third quarter and net absorption turned negative by 10,000 square feet.

"The rise is largely attributable to the high asking rates on Maple Drive," said Neil Resnick, a broker with Grubb & Ellis. "The buildings at 331, 335 and 345 North Maple Drive are asking in the high 3's."

DreamWorks SKG, for instance, signed a 10-year, 61,000-square-foot lease at around $3.75 per square foot at 331 Maple Drive.

"Smaller space is in tight supply in Beverly Hills," said Marc Lebowitz, vice president at First Properties. "Medical office is particularly tight--absorption is through the roof and vacancy is in the low single digits."

There were two notable medical office deals. Southwest Value Partners XI bought the 100,413-square-foot medical/professional building at 8920 Wilshire for $18.2 million, which was 91 percent leased. Vascular specialist Wayne Gradman leased 5,800 square feet for $2.85 per foot at 450 N. Roxbury in a 10-year deal.

By contrast, Santa Monica, Century City and Marina Del Rey/Culver City have taken a beating in the ongoing economic crunch.

In Santa Monica, net absorption fell to negative 38,750, from 154,117 in the previous quarter, and vacancies rose to 17.2 percent from 16.5 percent in the previous quarter. Class-A rents held steady at $3.39 per square foot.

"Vacancy and absorption were driven by the continued contraction of technology, media and creative companies," Lebowitz said. "I expect we'll a decrease in rents to counter bargain deals in other markets."

Law firm Liner Yankelevits Sunshine & Regenstreif left 3130 Wilshire for Westwood, taking 40,000 square feet at $3.01 per foot at 1100 Glendon Ave. Elkins Management filled the 3130 space in a four-year, $1.25 per-square-foot deal.

"I'm not seeing tenants wanting to go to Santa Monica as much as they did a year ago," Stokes said. "There's not enough parking and it's kind of a hassle to go downtown. Still, it's a great place to have an office if you want amenities, cool weather and views."

Once tech-heavy Culver City/Marina Del Rey posted the highest vacancy on the Westside, at 20.2 percent.

Still, there were glimmers of hope. Concessions from landlords helped fill some space, and while vacancies rose, net absorption has remained in positive territory. Posting 38,899 square feet in fourth quarter absorption, the submarket closed the year having absorbed more than 214,000 square feet, compared to negative net absorption of 219,486 in 2001.

Concessions created Class-A asking rates of $2.36, down from $2.58, though Lebowitz said, "The look range is more like $1.75."

For example, Mediacopy took 52,000 square feet in a five-year, $5 million deal at 3535 Hayden Ave., and Bidz.com took a 50,222-square-foot sublease from Viant Corp. at 3562 Eastham Drive in a 6.5-year deal at about $1 per square foot.

"It continues to be rough on the Westside' Lebowitz said. "I'd say the majority of the hemorrhaging is done, but we'll see decreasing rents throughout the greater submarket for a while."

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RELATED ARTICLE: Major Events:

* SCLA leased 40,000 square feet for an undisclosed sum at 9601 Wilshire.

* Principal Life Insurance Co. sold the 146,790 square foot Teleflora Plaza at 12233W. Olympic Boulevard to 12233 West Olympia Associates for $21.8 million.

* California State Teachers' System sold the 54,758 square foot 9720 Wilshire Building for $15.5 million to Duesenberg Investment Co.

* Rondor Music International sold its 26,250 square foot building at 360 N. La Cienega for $5 million to Beverly Gemini Investments.

* Mani Brothers sold 100 Corporate Pointe in Culver City to CD Equities for $21 million.