WESTSIDE: Offices : Westside Office Market: More Move Out Than In : Tenants: With new buildings coming on line and financial troubles at major financial institutions, vacancies soar.

More tenants vacated West Los Angeles office space than moved in during the first quarter of 1990, marking the first time in more than five years that the now-overbuilt area has posted a negative absorption rate.

Most local developers and brokers thought that the pricey Westside was “immune to troubles like high vacancies, overbuilding and lack of tenants that have plagued other areas,” said John Carpenter, a senior vice president at Grubb & Ellis Commercial Real Estate Services.

“What we’re seeing is a much more moderate leasing cycle, and one that is accompanied by a profusion of new development,” he said.

“The collapse of Drexel Burnham Lambert, along with the fact that two major players in the Beverly Hills market--Columbia Savings and VMS Realty Partners--are seeking buyers for their portfolios, has thrown an element of uncertainty into the market.”

So too has the fact that about 15 million square feet of office space is in various stages of development on the Westside--with not enough tenants in sight.

Office-space absorption, equal to newly leased space, less vacated space, totaled a negative 30,500 square feet in the first quarter of this year, according to Grubb & Ellis. This is in contrast with the 300,000 to 500,000 square feet of quarterly absorption that has heretofore been typical on the Westside.

The latest trend, predicted Westside watchers, suggests lower rental rates, fewer upbeat developers and a host of unemployed office brokers.

Commenting at a conference of the Westside Real Estate Group earlier this month, Richard Hollander, president of the Signature Group in West Los Angeles, said that “as liquidity continues to dry up in the near term, we will see a shakeout in the market. Investors working with equity and cash will stay in the game; those operating from debt won’t make it.”

The picture isn’t all bleak, however, said Marc Danziger, a vice president at Julien J. Studley Inc. in Westwood.

“While the perception of the market may be negative, the reality will be far better,” he said. “Well-capitalized buyers who are knowledgeable about markets will continue to invest successfully in Southern California.”

Work Resumes on Hotel Stalled for 2 Years

Nikko Hotels International will manage a new 304-room hotel project along La Cienega Boulevard near the Beverly Center, which is rising out of the ground after a series of troublesome construction delays.

Stymied by the bankruptcy of a former owner, lack of financing and plenty of neighborhood competition, the project has been nothing but a deep hole in the ground for more than two years.

Southmark Pacific Corp. of Pasadena started construction in 1987 on what was originally slated to be the 395-room Beverly Park Hotel. Problems at parent Southmark Corp. of Dallas--which filed last July for Chapter 11 bankruptcy protection--helped stall and eventually stop construction.

The company sold out last spring to Beverly Park Hotel Associates Ltd., which is now a U.S.-Japan partnership of Kawasaki Enterprises, Japan Airlines, Garden Homes Development, the Nakash Family Interests (owners of Jordache Enterprises) and other limited partners, most of which are represented by New York-based hotel investors Udi Toledano and Joseph Mizrachi. The new owners are planning a four- to five-star hotel with fewer rooms and more suites than what Southmark originally had in mind.

Any hotel that is completed at the site is likely to face stiff competition. Such nearby hotels as Ma Maison Sofitel, Four Seasons and several owned by hotelier Severyn Ashkenazy already report relatively high vacancy rates.

And, according to analysis by KPMG Peat Marwick of Los Angeles, the Nikko Hotel owners will have to charge an unlikely $300 a night per room just to break even on their $90-million project. Originally, the estimated cost of finishing work at the 400-by-200-foot site was about $30 million.

New Partner Joins Up for Trade Center Hilton

Matsushita Real Estate has become a financial partner in the $80-million, 393-room World Trade Center Hilton Hotel, joining developers IDM Corp. and Kajima International Inc. in the Long Beach hotel, set to break ground in May.

The $550-million Greater Los Angeles World Trade Center includes a 27-story, 558,000-square-foot office tower and is eventually planned to total 2.5 million square feet of commercial development space.

County Retirement System Buys Gateway

Pasadena Gateway Plaza has been sold to the Los Angeles County Employees Retirement System for $55 million by Los Angeles-based builders Trenton Development Corp. and H.T. Greene & Associates.

Located at the southeast corner of Lake Avenue and the Foothill (210) Freeway, Pasadena Gateway Plaza includes 300,000 square feet of office space on 14 levels, plus a separate 200,000-square-foot parking structure. The Beverly Hills office of Chicago-based Heitman Financial Services Ltd. acted as the retirement association’s asset and financial manager in the transaction, while John Alle Co. represented the sellers.

SALES 3 Shopping Centers Change Ownership ARKA Properties Group of Beverly Hills and Krieger Construction & Development Co. of Van Nuys have purchased three shopping centers totaling about 175,000 square feet for more than $20 million.

The properties include Old Towne Center in Thousand Oaks, Woodland Hills Village in Woodland Hills and The Grove in Laguna Niguel. The properties were bought through entities named Northstar Properties Group I, II and III. Coldwell Banker Commercial Real Estate Services was exclusive broker to the deals.

Tokai Shipping Inc. of Japan has bought Cypress Corporate Plaza, a three-story, 85,619-square-foot office building at 10805 Holder Street, for $10.7 million. Seller Cabot, Cabot & Forbes was represented by the Seeley Co., while the buyer was represented in purchase transactions by Cushman & Wakefield of California.

DEVELOPMENT Retail Center Opens in Sherman Oaks Oak Ridge Plaza opened for business last month at the corner of Ventura and Beverly Glen boulevards in Sherman Oaks. The 12-million, 41,359-square-foot retail center is a project of Minneapolis-based Oak Ridge Development Co. and includes 170 parking spaces.

Developers Raffi Cohen Industries and Melvin Simon & Associates recently “topped out” their 300,000-square-foot twin to the Imperial Bank Tower at 2nd and Figueroa streets in downtown Los Angeles. The complex will have an estimated value of $246 million when completed, and include 600,000 square feet of office space in two buildings connected at their bases. The new North Tower is reportedly 32% pre-leased, with law firm Lewis D’Amato, Brisbois & Bisgaard committed to 100,000 square feet.

Messenger Investment Co. of Irvine and Mission Land Co. of Brea have started construction on Corona Corporate Center--a 200,000-square-foot office project on 9.6 acres at the northwest corner of Joy and Rincon streets in Corona. Phase I of the three-phase, $25-million development will be a two-story, 45,000-square-foot building that has been about 50% pre-leased to a division of the Allstate Insurance Co.

Also in Corona, developer Nathan J. Leanse of Beverly Hills is completing a 12-acre, $11.8-million light-manufacturing and distribution business park within the Corona Spectrum. The business park includes three buildings totaling 234,460 square feet.

Santa Fe Pacific Realty will relocate at the end of this year from Brea to a four-story office building under construction at its PacifiCenter Anaheim--a $100-million mixed-use office and commercial development in northwest Anaheim. The 26-acre project will also include two other office buildings, a 140-room hotel and a 23,000-square-foot retail center, which began construction this month.

SDC Development of Newport Beach has acquired 31 acres of land for construction of the Archibald Freeway Center--a $40-million project slated to break ground in the first quarter of 1991 in Ontario, just off the Pomona Freeway at Archibald Avenue. The project is expected to encompass 18 industrial buildings, along with a furniture showroom and a small retail component.

Forest City Properties Corp. has secured $93 million in financing from Dai Ichi Kangyo Bank Ltd. with which it plans to begin construction on 755 apartments at the intersection of Jamboree Road and Campus Boulevard in Irvine.

Other local developments owned by Forest City include the 4,100-unit Park La Brea community, the 450-unit Studio Colony apartments near Universal City, and the Metropolitan, a recently completed 270-unit apartment tower in the South Park area of downtown Los Angeles.

The company’s parent, Cleveland-based Forest City Enterprises, has a current portfolio of properties valued at about $1.3 billion.

Galperin is a Los Angeles-based free-lance writer who has covered the commercial real estate scene for several years. News releases and column inquiries should be mailed to 8306 Wilshire Blvd., No. 7078, Beverly Hills, Calif. 90211.

WESTSIDE OFFICE VACANCY RATES Office vacancy rates for the first quarter of 1990.

Beverly Hills: 12.8%

Brentwood: 25.4%

Century City: 10.2%

Hollywood/West Hollywood: 7.3%

Marina/Culver City: 24.1%

Miracle/Park Mile: 13.4%

Santa Monica: 12.1%

West L.A.: 17.3%

Overall: 15.6%

SOURCE: Grubb & Ellis Research Services Group