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Westside office market still hot

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Times Staff Writer

The Westside’s long-running office market boom, propelled in large part by entertainment, technology and media companies, shows no sign of abating, despite the lack of timely remedies for the area’s increasingly snarled traffic.

That was the message conveyed to developers, urban planners and politicians who gathered Friday for a summit on Westside growth and economics in Santa Monica.

“The West Los Angeles office market is such a hot market that, even with the addition of people and even though drive times will be in excess of what they are today, that won’t have an adverse effect,” predicted Neil B. Resnick, executive vice president of Grubb & Ellis.

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The specter of ever-more-crowded freeways and streets failed to dampen the optimism of many at the event.

But the prospect of continued growth in the Westside office market, along with the looming construction of thousands of apartment and condo units in Marina del Rey, Beverly Hills, Century City and Playa Vista, raised the hackles of one Westside resident.

“We have had it!” Diana Plotkin, president of the Beverly Wilshire Homes Assn., said in a telephone interview. “The infrastructure cannot handle any more development.

“Everybody wants to build on the Westside. Nobody wants to be on the Eastside or in South-Central. How wonderful will it be for the businesses that come into these wonderful buildings ... when people can’t get to work?”

Presenting Grubb & Ellis’ 2007 forecast for the Westside office market, Resnick painted a rosy picture for commercial landlords of rising rents and declining vacancy rates. The improving fundamentals continue a trend that began in early 2004.

Westside commercial property is among the most highly sought-after investments in the country. In this year’s third quarter, the area’s 7.1% vacancy rate approached the lowest rate on record, 5.8% in 2000. Meanwhile, average “asking rents” are soaring throughout the region, to just under $4 a square foot in some places.

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Occupying space in the market are such name-brand employers as AOL, Yahoo Inc., Fox Sports Interactive, International Creative Management and Creative Artists Agency. Grubb & Ellis said that by far the most notable deal in 2006 was the relocation of the famed William Morris Agency, which signed a lease for 150,000 square feet in a building to be erected on Beverly Drive in Beverly Hills. The 20-year term is one of the longest signed in years.

The shift to a landlord’s market is in stark contrast to the soft commercial scene after the dot-com decline just a few years ago.

Now it’s on the march again.

Resnick said he expects the market to remain strong for the foreseeable future. Overall, the Westside has about 51 million square feet of office space, with an additional 2 million proposed or under construction. The new space would accommodate roughly 8,000 workers.

The largest office project underway in Los Angeles County is the $275-million 2000 Avenue of the Stars project in Century City. It has pre-leased 80% of its 724,000 square feet of office space, Grubb & Ellis said.

In Hollywood, many new developments are going up, including 7046 Hollywood Blvd. and the Sunset & Vine Tower, both mixed-use projects that should help to rejuvenate the area.

Culver City developer Fredrick Smith and architect Eric Owen Moss are proposing the Conjunctive Points Theater Complex in a parking lot at Smith’s Hayden Tract, a whimsically converted warehouse complex that already houses many tenants.

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Residents of eastern Culver City are concerned that the increase in visitors would further congest the area.

Throughout the Westside, Grubb & Ellis said, tenants are signing long-term leases in an effort to hold rent increases at bay.

Workers flood daily into Westside office buildings. Because housing is so expensive, only about a third of the region’s workers live on the Westside. That leaves more than 300,000 people a day commuting to the area, according to a Los Angeles County Metropolitan Transportation Authority study.

Steve Soboroff, president of Playa Vista, who moderated a panel at the summit, chided Santa Monica for creating millions of square feet of office space without building affordable housing to go with it.

“We need housing where people work, and we need parks where people live,” Soboroff said.

Further growth is on the horizon, with the MTA projecting that Westside population will rise by 15% and jobs by 23% in the next 15 years.

“I’m glad that the commercial growth is there,” Laura Lake, a longtime Westwood activist, said in a telephone interview. “That’s terrific. We need it. But I don’t know how long we can sustain that without rolling up our sleeves and coming up with a proposal to at least mitigate part of the impact.”

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The MTA recently broke ground on the Expo Line, a light-rail line that will run from downtown to Culver City, with a possible extension to Santa Monica.

Transit advocates also are pushing for a subway from downtown to the beach in Santa Monica.

Such mass transit, activists say, is vital.

“The Westside desperately needs transit,” said Gail Goldberg, Los Angeles’ planning director.

Mayor Antonio Villaraigosa has said building the subway is one of his top priorities.

But the idea faces many challenges, including some community opposition, and, most daunting, the hefty price tag.

The cost of subway construction is estimated at $300 million to $350 million a mile. It’s roughly 13 miles along Wilshire from the subway’s current western terminus at Western Avenue to the beach.

martha.groves@latimes.com

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(BEGIN TEXT OF INFOBOX)

Fewer vacancies

Vacancy rates in Westside office buildings have declined markedly since early 2004, indicating a robust market.

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Quarterly office vacancy rates

*--* Q3/04 15 .2% Q4/04 14.6% Q1/05 13.5% Q2/05 11.5% Q3/05 9.9% Q4/05 9.1% Q1/06 8.4% Q2/06 7.7% Q3/06 7.1%

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Source: Grubb & Ellis

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