Westside buried under sublease avalanche.

A second wave of sublease space is washing onto the West L.A./East Santa Monica office submarket, just months after that area was inundated by a sublease wave unleashed by busted dot-com tenants.

"The sublease space coming back on the market now is from Sony, Sutro, Futurdontics, Saban -- it's not dot-com stuff, it's the economy-is-in-the-toilet stuff," said Matthew Miller, a broker at CRESA Patners. "The dot-com thing was clearly the first blow, but there have been other things, including 9/11, and it's not over yet."

The new wave, combined with a near total absence of deals, has made it impossible to ascertain the true "market rate" for office space in the once-sizzling West L.A./East Santa Monica pocket.

Despite the confusion, several veteran Westside brokers agreed that the rate is well below the $3.50 to $4 per square foot monthly lease rates that some landlords were commanding during the dot-com frenzy.

"Real-offer Westside deals have come down 10 to 15 percent across the board since 9/11, and we have a ways to go," said Gerald Porter, vice chairman of CRESA Partners. "We're seeing landlords who are quoting $3.25 a foot, but they call and tell us they'll do $2.50 deals."

Much of the uncertainty is being caused by the diverse nature of the West L.A./Santa Monica submarket, which extends roughly from Beverly Glen Boulevard west to 14th Street.

The submarket's office landlord population is a hodgepodge of institutional and entrepreneurial owners, from big publicly traded real estate investment trusts and pension funds to individuals. Office property types run the gamut, from edgy converted warehouses to button-down corporate space. And the offerings range from very short-term subleases on a few thousand feet to long-term direct leases on massive blocks, and everything in between. The second wave of sublease space further complicates the picture.

Amid that crazy quilt, hardly any deals are being struck that might be used to establish a true market rate.

Tenant brokers point to one or two smallish sublease deals cut in recent weeks at about $2 a foot as the going rate. Landlord representatives concede that the submarket is softening further.

"This submarket is the complete opposite of, say, Century City, where all the landlords are institutional, there's hardly any sublease space, there were essentially no tech startups and there's a steady flow of deals getting done," said Anton "Tony" Natsis, a landlord leasing attorney at Allen Matkins Leck Gamble & Mallory.

Natsis predicted that in the next six months a few sizable deals will be executed at one or more of the class-A projects in West L.A./East Santa Monica. Those will help reestablish the area's true market rate.

Until then, Natsis said, "if you ask 10 Century City brokers what the market rate is, they'll all say pretty much the same thing. But if you ask 10 Santa Monica brokers, they'd say, 'I don't know."'

New Wave

Westside tenants that have recently put space up for sublease.

                         Space
Sublessor            (sq. ft.)  Location

Saban Enter. (*)       300,000  10960 Wilshire
                                Blvd., Westwood
IBM Corp.               53,000  Arboretum Court-
                                yard, Santa Monica
Alesis Studios (**)     45,000  1633 26th St.,
                                Santa Monica
ECompanies              43,000  Arboretum Court-
                                yard, Santa Monica
Futuredontics Inc.      31,630  Howard Hughes
                                Center, West L.A.
Sutro & Co.             30,000  Water Garden II,
                                Santa Monica
Freemantle Enter.       20,000  2700 Colorado
                                Ave., Santa Monica
Tony Kaye &             17,000  Bergamot Station,
Partners                        Santa Monica

(*)Pending, as company is being acquired by the Walt Disney Co.

(**)Now being offered as direct lease space.

Source: Business Journal Research