Madison Wins Blackstone Leasing Assignment

The four properties are the 282,000-sf Westwood Center Building at 1100 Glendon Ave., the 534,000-sf 10880 Wilshire Blvd. building, the 205,000-sf Tower in Westwood building at 10940 Wilshire Blvd. and the 576,000-sf 10960 Wilshire Building. Total vacancy at the four properties is about 4%, according to Barnett, who says the low vacancy reflects the strength of the Westside office market, where the vacancy is in the range of 6%.

The Westside office market today enjoys "the highest rates and lowest vacancies I've seen in my career," comments Barnett, a 25-year veteran of the industry. He says the market is in the third year of an up cycle that has gained significant velocity within the past year.

One of the biggest drivers of the current conditions in the Westside market is that "we just don't have future development possibilities because of the lack of sites to build on," Barnett says. Other factors driving rates up and vacancy down are increasing demand, a strong economy and entitlements that are extremely difficult to secure even when development sites are available.

Barnett points out that part of what is happening now on the Westside has origins going back to 1986, when the Los Angeles City Council adopted Proposition U, a measure that severely limited commercial development throughout the city. Thanks to those limitations and the difficulty of obtaining entitlements in other Westside cities like Beverly Hills and Santa Monica, developing an office building "is exponentially more difficult than it used to be," Barnett observes.

The four new properties for which Blackstone tapped Madison Partners formerly were leased in-house by Equity Office Properties Trust and CarrAmerica, their former owners. Blackstone has held onto these assets and buildings in other prime US markets while shedding large portfolios of other office assets that it acquired in the EOP and CarrAmerica deals.

Among Blackstone's other Westside assets is the 1.2-million-sf Howard Hughes Center, which is also a Madison Partners leasing assignment. Blackstone "sees a lot of future potential rent growth" at the Westside assets, Barnett says, so the Madison Partners assignment will focus on maximizing rents when leases expire and tenants renew.