With Metro-Goldwyn-Mayer Inc. packing its bags for a move to Century City, the landlord of MGM Plaza in Santa Monica is about to begin a major renovation to improve the aging landmark in the highly competitive Westside office market.
Owner Tishman Speyer Properties will spend $17 million to transform the 15-acre property with six buildings from a stark concrete locale into a lush corporate campus and public park.
MGM Plaza is the only Los Angeles-area property owned by Tishman Speyer, a New York-based developer and landlord that owns and operates several signature properties, including Rockefeller Center and the Chrysler Building in New York and Sony Center in Berlin.
Entertainment and film company MGM agreed to become the major tenant in a high-rise under construction in Century City that will be called MGM Tower. It's expected to open in June.
Tishman Speyer will change the name of its Santa Monica property to Colorado Center in May and already is wooing new tenants.
Broadcaster CBS recently moved into 35,000 square feet in the Santa Monica complex, and the landlord is negotiating with another tenant for 110,000 square feet, said David Augarten, a senior managing director at Tishman Speyer.
MGM, which now has 350,000 square feet in the complex, also has decided to retain 90,000 square feet there after moving its headquarters to Century City. MGM's home entertainment unit will stay in Santa Monica, the company said.
MGM's departure will raise the vacancy rate at the property to more than 30%, Augarten said, but Tishman Speyer is betting that its buildings will soon fill up because it is difficult to build in Santa Monica, and many companies want to locate there.
"The vacancy rate could decline very quickly when the economy improves," Augarten said.
Santa Monica real estate broker Vince Muscelli said the city's overall office vacancy rate is about 20%, including sublease space, but could fall to 15% this year as tenants who were priced out of the market during the late 1990s boom return to take advantage of falling rents.
Landlords were able to command monthly rents of $3.25 per square foot in early 2000, Muscelli said, but the cost of space in premier buildings has fallen to as low as $2.25 as the market struggles to recover from the dot-com collapse and the contracting economy.
MGM Plaza dates to the late 1970s, and it reflects the design conventions of the era, said Stephanie Psomas, a vice president at Pamela Burton & Co., a Santa Monica architecture firm. "Right now, it's a little bit static," Psomas said.
"We want it to be more lively and flowing," she said.
Renovation plans include new entryways, with water features off Colorado Avenue and the planting of shade trees, shrubs and grasses to create a more park-like setting. The makeover will be completed by the end of the year.