A slight decline in the commercial vacancy rates on the Westside has led a national real estate firm to predict continued construction throughout the Westside.
A midyear study by Grubb & Ellis Commercial Real Estate Services showed a drop in vacancy levels from 11.9% to 11% in the last year, while lease rates increased 3% and monthly parking rates increased 7% in the last six months.
"Despite Proposition U and some questions about the continuing economic strength of the entertainment industry, which makes up a healthy portion of the area's office tenants, developers continue to demonstrate a high degree of faith. Our studies indicate further that this faith will be well demonstrated into the 1990s," said John Carpenter, senior vice president and district manager of Grubb & Ellis' West Los Angeles office. Carpenter was referring to the 1986 initiative that limits future development in Los Angeles and to the possible effect of the 21-week-old strike by the Writers Guild of America.
Growing Office Market
According to Grubb & Ellis, there are nearly 38 million square feet of office space on the Westside. Carpenter said that over the next five years, 6.6 million square feet will be added, "maintaining West Los Angeles' position as the largest single office market in the western United States."
"We're in agreement with them," said George I. Rosenthal, president of Raleigh Enterprises, which built the 11-story Executive Life Center and 17-story Executive Towers buildings on Olympic Boulevard in West Los Angeles. "We're seeing considerable interest in our buildings. I think there is ongoing recognition of the importance of business in the Westside. The market is driven by desirability to be in the Westside."
Carpenter said most of the new development will be in Santa Monica, where 1.3 million square feet is either under construction or in planning. That figure does not include the nearly 1.4 million square feet of office space that is being proposed for an area south of the Santa Monica Airport.
Carpenter said development will probably proceed southward along the San Diego Freeway to Culver City, where four additional buildings have been approved for the Corporate Pointe project.
12 New Projects
In addition, 12 new projects have been approved in Beverly Hills, the most the city has seen at one time in nearly a decade.
The strong demand for office space has resulted in an average 3% increase in lease rates and a 7% increase in the average monthly parking fees charged by operators of high-rise parking structures during the first six months of the year.
The average low lease rate, according to the study, increased from $1.93 to $2 a square foot, and the average high rate increased from $2.17 to $2.24 a square foot. The sharpest average low-end rate decrease occurred in Hollywood, where rates dropped 7% from $1.50 to $1.40 a square foot. The sharpest average high-end increase occurred in Beverly Hills, where rates increased 15% from $2 to $2.30 a square foot.
Most Expensive Address
The most expensive address in the Westside is 100 Wilshire in Santa Monica, where the high lease rate is $3.75 a square foot.
The largest jumps in monthly parking rates, according to the study, were in Santa Monica and Brentwood, where average rates jumped 16%, or from $45 to $52 in Santa Monica and from $64 to $72 in Brentwood.
Beverly Hills, which had only a 4% increase, has the highest rates at $81. Monthly parking rates in Marina del Rey and Culver City remained unchanged at $42, according to the study, and rates in Century City dropped 3% from $76 to $74.
"Although these rises . . . won't make tenants very happy, they are one of the indicators we use to measure a market's strength," Carpenter said.