Westside opportunities continue to lure office tenants from Mid-Wilshire, downtown L.A.

Los Angeles companies leaving downtown L.A. and Mid-Wilshire office towers for the perceived safety and prestige of Westside offices and a near halt of new construction are making the Westside vacancy rate drop.

Century City, Beverly Hills, Westwood and Santa Monica office buildings continue to pull tenants out of the Mid-Wilshire and downtown L.A. markets, said Tracy Rasmussen, a senior associate at the CB Commercial Real Estate office in Century City. He said the trend will continue even though Westside office tower owners lease space for 5 to 10 percent more per square foot than do their Mid-Wilshire competitors.

"We've had inquiries from tenants in the Mid-Wilshire region since the riots. It's going to step up the rate at which tenants move out of the (Mid-Wilshire) area because they are worried about security," Rasmussen said.

Westside office building managers can lure hundreds of tenants from the downtown L.A. and Mid-Wilshire office markets before their collective 7.5 million square feet of empty office space is filled, experts note.

But throughout the Westside, 21.2 percent of the 35.39 million square feet of offices is empty, according to data from Julien J. Studley Co., a commercial real estate brokerage. Even so, the area is still better off than downtown Los Angeles where office building owners report a vacancy rate of 27.8 percent, or 9.37 million square feet of its 33.7 million square feet of office towers, according to the Studley data.

Landlords and commercial brokers in Beverly Hills, Century City, Westwood/West Los Angeles and Santa Monica collectively leased 1.6 million square feet of offices in the first four months of 1992, according to the Studley study. By comparison, downtown L.A. landlords leased only 1.07 million square feet of space in the same period, according to the Studley data.

Within Century City alone, tenants signed leases to move into 401,106 square feet of offices in the four-month period. Studley reports 17.7 percent of that submarket's 9.86 million square feet of offices is empty.

Tenants in Mid-Wilshire and other L.A. submarkets who are seeking 1,000 to 2,000 square feet are being lured into such Century City sites as Fox Plaza, the three-story, 710,000-square-foot building at 2121 Avenue of the Stars; the ABC Entertainment Center, the six-story twin towers at 2020 and 2040 Avenue of the Stars that total 580,000 square feet; and 1999 Avenue of the Stars, the 39-story building with 785,000 square feet, CB's Rasmussen said. Tenants pay $1.60 to $3.00 per square foot in Century City, he said. In the Mid-Wilshire district, office tenants pay from $1.00 to $1.85 per square foot per month.

By comparison, tenants pay $1.65 to $2.50 per square foot per month to office in Beverly Hills. As with Century City, Rasmussen said the tenants who need 2,000 to 4,000 square feet of space are willing to pay the extra money to move to Beverly Hills for a more prestigious, safer environment, Rasmussen said.

Of the four major Westside submarkets, the Studley study shows, Westwood/West Los Angeles, mainly the Wilshire and San Vincente boulevard corridors, still has the highest vacancy rate, 23.8 percent or 2.87 million square feet. Landlords there leased 417,556 square feet of offices to companies in the first four months of 1992.

Of all the Westside submarkets, only Santa Monica surpassed Westwood/West Los Angeles in square footage leased. Combined, Santa Monica landlords filled up 450,168 square feet of offices in the first four months of the year, according to Studley data.

The area's oversupply of space, the lingering recession and lenders' reluctance to finance new projects have caused developers to put planned projects on hold.

According to the first-quarter 1992 office leasing report published by brokerage Grubb & Ellis Co., only nine projects totaling 660,000 square feet are in the process of being built. Another 32 projects, totaling 6.9 million square feet, have been approved but won't get under way until virtually all of the empty space is leased, lease rates go up and lenders regain faith in the area's commercial real estate market, according to the report.

Stuart Cowan, Grubb & Ellis Co. broker and senior marketing consultant, said that despite the 21.2 percent overall Westside vacancy rate space in some submarkets, particularly Santa Monica and Century City, is getting tight.

Santa Monica had the largest positive absorption of all the Westside submarkets in the first three months of 1992, according to Grubb & Ellis first-quarter 1992 survey of Westside multi-tenant office building inventory. Tenants there leased 204,000 square feet more space than they vacated from January 1 through March 31, 1992. A similar study conducted by Julien J. Studley also showed Santa Monica had the greatest amount of leasing activity, 450,168 square feet, in the first four months of 1992.