Westside office market meets expectations for improvement.

Westside - Despite a slow first quarter, real estate insiders were predicting in April that the Westside office market would pick up in the second quarter this year. Three months later, their predictions appear to be on the money, as the Westside posted a busy second quarter for both leasing and sales activity.

In an ongoing trend, much of the Westside leasing activity in the second quarter was driven by entertainment clients coming into the area.

Two of the biggest deals in the three-month period involved subsidiaries of entertainment giant Viacom.

In the bigger of the two, Viacom's MTV Networks group signed a lease for about 100,000 square feet in the building at 2600-2800 Colorado Ave. in Santa Monica. MTV signed its lease with Santa Monica developer M. David Paul Associates, which purchased the Colorado Avenue building in late May for $38 million.

M. David Paul was negotiating for several months to buy the 300,000-square-foot building from its former owner and occupant, Tenet Health Care Corp. But it was only after the MTV lease was signed that M. David Paul finally closed its purchase of the building.

In the second Viacom deal of the quarter, two of the company's other subsidiaries, Viacom Productions and Showtime Network, signed a mid-May lease for 53,000 square feet of space in Westwood. The two subsidiaries will now move from their present location in Universal City to the building at 10880 Wilshire Blvd.

The 10880 Wilshire building also became home to another major entertainment client in the second quarter. In that deal, the newly-formed Americast consortium leased 50,000 square feet of space in the building, which will become the company's headquarters. Set up last fall, Americast is a joint venture between the Wait Disney Co., GTE Corp. and "Baby Bell" companies Ameritech, BellSouth Corp. and SBC Communications Inc.

Westward bound

Both of Viacom's recent deals, and the Americast deal to a lesser extent, involved entertainment firms leaving the crowded Burbank/Glendale office market for greater space availability on the Westside. In yet another example of the western migration, Rysher Entertainment left Burbank in the second quarter and relocated into 62,000 square feet of space at the MGM Plaza, 2401 Colorado Ave., in Santa Monica.

Outside the entertainment industry, a law firm and a high-tech company also signed major Westside leases in the second quarter.

In the larger of the two deals, law firm Littler Mendelson Fastiff Tichy & Mathiason signed a lease for 36,000 square feet at the Century Plaza Towers south tower, 2049 Century Park East. And in the other deal, high-tech firm Silicon Graphics signed a lease for 19,500 square feet in the 11845 W. Olympic Blvd. building in West L.A.

With so much leasing activity in the market, it may only be a matter of time before some new office development begins on the Westside, according to real estate sources.

"The entertainment industry is expanding faster than they're building buildings, especially in Santa Monica," commented Ian Strano, vice president of Beitler Commercial Realty Services in Brentwood.

Vacancy drop

With all the new tenants coming into the area, vacancies were down in nearly all the major Westside office markets in the second quarter, according to figures from real estate brokerage Grubb & Ellis Co.

Westwood posted the biggest drop, with vacancies falling 2.5 percentage points from 16.2 percent in the first quarter to 13.7 percent in the second. The current vacancy rate in Westwood is down nearly 6 percentage points from a year ago.

Other Westside submarkets with improved vacancy rates in the second quarter included Beverly Hills, Century City, Marina del Rey/Culver City and West L.A. Only Brentwood and Santa Monica posted minor increases in their vacancy levels, though the Santa Monica rate remains safely in the single digits.

In the acquisition arena, three major Westside properties changed hands in the second quarter, one of which was the M. David Paul deal mentioned above.

In another deal of similar magnitude, an institutional client advised by West L.A.based Douglas Emmett Realty Advisors purchased the 12-story tower at 401 Wilshire Blvd. in Santa Monica for between $36 million and $39 million.

And in the other major acquisition, investors advised by Koll of Newport Beach purchased the 328,000-square-foot La Cienega Slauson Business Park in Culver City for close to $20 million. The seller, Bank of Montreal, suffered a $30 million loss on the sale.

But sources said the biggest Westside building sale of 1996 may still be yet to come. The sale would involve the twin 2.2 million-square-foot Century Plaza Towers at 2029 and 2049 Century Park East, which are now on the market, according to J.D. Cook, managing director in the Westside office of Cushman Realty Corp.

No asking price has been disclosed, but sources said the two towers, now owned by a partnership that includes Prudential Insurance Co. of America and Eastdil Realty Inc., could fetch a price as high as $500 million.

"I think a sale could happen (for the Century Plaza Towers) in the next six months. It's considered a trophy property that would attract worldwide attention," said Cook.