Competition Heats Up for Westside Tenants : Office Buildings: With several new towers being completed, vacancies are expected to rise. But landlords can look to a tighter market soon.
Get busy.
That’s what West Los Angeles office building owners are ordering their leasing agents to do--and fast.
Vacancies rates are about to escalate as several new first-class office buildings reach completion, and competition is heating up.
Center West at 10877 Wilshire Blvd. in Westwood opens next month with 75% of its 296,000 square feet yet to be leased. The newly renovated Sterling Plaza at Wilshire Boulevard and Beverly Drive in Beverly Hills will be open for business in March too. So far, the only tenant in sight is billionaire Donald Sterling. And Wilshire Landmark II at 11766 Wilshire Blvd. joins the competition with but a few of its 24 stories spoken for.
Donald Bren’s Westwood Gateway towers, completed in 1989 at the intersection of Santa Monica Boulevard and the San Diego Freeway, have several hundred thousand square feet of office space available.
Several blocks away, Raleigh Enterprises is looking to fill up its recently completed Executive Tower at 11400 Olympic Blvd. And, in Century City, JMB/Urban Development Co. is making aggressive deals to ensure that its new 1999 Avenue of the Stars tower leases well before the doors open.
Overall, vacancies are expected to rise from 13.5% in the Westside to about 15% by fall, predicts Grubb & Ellis Commercial Real Estate Services. That translates into good news for tenants looking to cut a favorable deal.
The opportunity for bargains will be short-lived at best, however, Grubb & Ellis said. Slow-growth has started taking its toll--with fewer major projects planned and the expectation of a tighter office market in 1991.
While about 3.1 million square feet of mostly high-rise office space is under construction on the Westside, most of the 10.4 million square feet planned beyond this year will be spread over low- and medium-height buildings. The smaller the project, the fewer the amenities offered, and the less likely it is for a project to command super-deluxe rental rates.
On balance, Westside developers see the leasing of their office buildings as a relatively easy and quick process compared to the long and arduous challenge of winning project approval from nearby residents and various city agencies.
It’s been nearly 12 years, for instance, since developer Kambiz Hekmat bought the Wilshire Boulevard parcel that has become Center West. Nine years later, in 1986, Hekmat found himself the defendant in a lawsuit brought by Friends of Westwood, which opposed the project as planned and demanded that it be down-sized. In 1987, Hekmat relented, agreeing to an 18% cut in the project size, along with other concessions.
The approval process at Center West suggests that new office buildings will be in short supply on the Westside in just a few years, local brokers predict. Landlords with some patience, it seems, will more than get their chance to make up for a current glut of high-class high-rise office space.
Where It’s Hot and Where It’s Not
Buyers of real estate hold a distinct advantage over sellers this year, report local developers, lenders and brokers polled by Arthur Andersen’s Real Estate Services Group and Southern California Real Estate Journal.
Responding to the second annual Southern California Real Estate Survey were 330 local executives, who foresee a generally favorable outlook for residential property and a somewhat guarded future for the commercial scene.
Topping the list of places with the best commercial outlook were the Inland Empire, north San Diego County, Long Beach and south Orange County. Less than 5% of executives responding predict any real commercial growth in Santa Monica, the San Fernando Valley, Palm Springs or San Luis Obispo.
What are the greatest challenges facing developers? Anti-growth scored a 68% response and traffic a 56% response. Also high on the list: environmental concerns and development fees.
Executives reported a very favorable regulatory environment in the Inland Empire and Las Vegas. A majority of executives characterized Santa Barbara and Santa Monica, however, as “hostile” to development.
Look for an increased shift from debt to equity financing in 1990, executives predicted. “This back-to-basics approach,” said Andrew S. Kane, director of Arthur Andersen’s real estate group, “is indicative of an overall shift in the business community, particularly lenders, toward increased conservatism.”
DEVELOPMENT 20-Story Building in Irvine Topped Out Irvine’s 3 Park Plaza office building at Jamboree Center “topped out” at 20-stories recently as workers now go about finishing the $85-million twin to the completed 5 Park Plaza tower. Set for completion this summer, 3 Park Plaza will be anchored by PacTel Cellular, which signed a lease with the Irvine Co. for a little more than 50% of the building’s 400,000 square feet.
Baxter Healthcare Corp. has announced plans for a new $50-million distribution center on 77 acres in Ontario. Set for a 1991 completion, this facility will be Baxter’s third in Ontario. The company operates a surgical kit-making plant and is set to open a second facility in 1990. Deerfield, Ill.-based Baxter has 64,000 employees worldwide and annual sales of more than $7 billion.
Leed Properties of Beverly Hills has announced the start of five industrial buildings totaling 800,000 square feet of space at Chino Industrial Park. The $40-million complex is being built on 18.5 acres by Oltmans Construction Co.
Centremark and Mission Land Co. started work recently on One Lakeshore Centre, a 183,000-square-foot office complex near Ontario International Airport. The $28-million project is located in the 70-acre Centrelake Business Park, also a Centremark-Mission joint venture.
Construction started recently on Dove Canyon Retail Center, a $20-million project in Rancho Santa Margarita by Western Skylines Development Corp. of Newport Beach. The 70,000-square-foot center is being built by Anaheim-based contractor Lyle Parks Jr. Inc. on 4 acres adjacent to Dove Canyon.
Buena Vista Marketplace is being developed by Trammell Crow Co. in cooperation with the Duarte Redevelopment Agency on 7.4 acres at the northwest corner of Huntington Drive and Buena Vista Avenue in Duarte. The $15-million, 91,000-square-foot retail center will be anchored by a Ralphs supermarket.
Neutrogena Corp. has a new home with completion of an $11-million office building at 5760 W. 96th St. in Los Angeles. The 65,000-square-foot building will accommodate 200 employees who have been working out of three nearby buildings.
Construction work started this month on Mission Grove--a 400-acre industrial, retail and residential project in the city of Riverside. Phase I is set to include 55 acres of “high-image” industrial space to be completed within the next year. Located at Alessandro Boulevard and Trautwein Road, Mission Grove is a development of Century City-based Regional Properties Inc.
Downtown Los Angeles’ Metropolis development inched closer to reality this month with the Community Redevelopment Agency’s approval of an owner-participation agreement, conceptual master plan and development drawings for the project’s first phase.
City Centre Development plans 2.7 million square feet of office, retail and hotel space on a 6.3-acre site just east of the Harbor Freeway and north of 9th Street.
Construction of the first of three towers designed by architect Michael Graves is scheduled to begin in late fall.
Lowe Enterprises of Brentwood and Boston-based New England Life Insurance Co. plan to begin construction in March on Fashion Row--a $24 million cluster of offices and warehouse space in the downtown Los Angeles garment district.
Up to 10 structures totaling 250,000 square feet of space are slated to fill a 4.5-acre parcel on Long Beach Avenue between Olympic Boulevard and 15th Street. The site is part of 112 acres purchased by Lowe in 1988 from Southern Pacific Railroad for $131 million.
Rodine Development Co.and Obayashi America Corp. broke ground this month on their $30 million Rodine Business Center in Pomona. The 22-acre project is set to include 18 buildings and is located at Pine Street and Arrow Highway.
Can Romance and Real Estate Be Linked?
“‘Real Estate & Romance:” So begins a personal ad published recently in the Times. The ad goes on to describe a “decent looking creative RE brkr” looking for a partner “who loves RE & maybe me. . . .” May their union develop into a commercial success!
