More businesses means more traffic for SM
MAIN STREET — Demand for office space in Santa Monica has increased dramatically over the last few years, causing rents to rise above levels found in other premier destinations on the west side of Los Angeles, according to a real estate forecast released Friday.
With an overall vacancy rate of 6.6 percent — one of the lowest in the last decade — rents for commercial space have jumped by 20 percent in the last year alone, with some property owners commanding an average of $4.34 per square foot, said Neil Resnick, executive vice president and managing director of Grubb & Ellis Co., a commercial real estate advisory firm that produced the forecast.
“In all of my 20-plus years of experience, it is amazing to me how quick of a shift has happened,” Resnick said.“We have seen huge increases in rents. Tenants are dropping their jaws.”
The forecast by Grubb & Ellis was released during the fifth annual Westside Economic Summit held Friday at the RAND Corp. headquarters in downtown Santa Monica. Commercial real estate experts, city officials and property owners gathered to answer the burning question on many people’s minds:“If you build it, will they come?”
The short answer is yes, said Resnick. Across the westside of Los Angeles, which includes the cities of West Hollywood, Culver City, Beverly Hills and Santa Monica, there is an increased demand for square footage, so much so that an 800,000 square-foot development in Century City, slated for completion in 2007, is already more than 60 percent pre-leased.
Much of the demand is coming from the entertainment and high-tech industries, including household names like Yahoo! Inc., America Online Inc., Fox Sports Interactive, Google, Creative Artists Agency and William Morris Agency, which recently signed a lease for 150,000 square feet in a yet-to-be-built complex in Beverly Hills, according to the forecast.
In the last few years, Santa Monica has seen an influx of entertainment, high-tech and software companies whose executives are attracted to the clean air; wide variety of retail and restaurants; entertainment venues; the seaside city’s close proximity to Los Angeles International Airport; and high-end housing, where corporate chiefs prefer to reside, Resnick said.
That has made Santa Monica the most expensive and desirable office market in West Los Angeles County. Soon, the forecast predicts Santa Monica will see rents rise to more than $4 per square foot. In some locations, including 100 Wilshire Boulevard, the rents are already well over $6 per square foot.
“That’s a fortune. I hope there’s turndown service,” Resnick said jokingly, refer-ring to amenities provided by luxury hotels that include fresh linens, clean towels and bedside chocolates.
Santa Monica currently has more than 7.6 million square feet of office space and is on track to add 2 million more in the next few years, said Resnick. That should help to keep prices relatively stable. However, demand will remain strong, therefore, those with low rents now should lock in long-term leases.
“It really is a great time to be a landlord,” Resnick said.
But is it a great time to be a resident of Santa Monica?
With increased demand comes an increase in traffic. Santa Monica and the rest of the Westside is suffering from gridlock, and there seems to be no relief in sight. That, coupled with the city’s aging infrastructure, which city officials admit has been neglected in the last few years because of budget constraints, signals a rough road ahead, literally.
There are no indications that longer drive times are going to scare people away.
“The West Los Angeles market is a hot market,” Resnick said. “And even with the addition of people coming into market that will create drive times in excess of what they are today, it’s not going to have an adverse affect on people coming here.”
Originally published in the Santa Monica Daily Press print edition on November 18, 2006. Read the original PDF.