Revitalization Keeps Market Moving

"If current activity continues its pace, 2008 should be an excellent year," says John Tronson, a Ramsey-Shilling principal, who has worked in the market for almost 20 years. Tronson points out that developers and their equity partners in Hollywood are among the biggest and strongest in the country, including the locally based CIM Group, Legacy Partners of Northern California, the New York City-based Clarett Group, Houston-based Camden Properties Trust and others.

The Clarett Group is working on entitlements for a project that would add office space at the site of the Pantages Theater, and the CIM Group--in addition to its holdings and developments under way in Hollywood--recently announced plans for a new office project in nearby West Hollywood.

[IMGCAP(2)]Tronson says that the demographics and political will to revitalize the submarket "are firmly in place" in Hollywood, which continues a renaissance of recent years that has produced new office, mixed-use, residential and retail developments. The area's office market consists of about four million sf, mainly on Sunset and Hollywood boulevards between La Brea Avenue and Vine Street.

Hollywood is one of a host of Westside Los Angeles office markets that continue to fare well despite the slowing US economy, according to the latest quarterly reports from major brokerage firms. The reports generally cite strong demand, limited construction and rising office rental rates as factors driving the market. One recent report cited a list of more than a dozen entertainment firms with space requirements totaling more than 1.4 million sf of renewals and/or new offices on the Westside.

[IMGCAP(3)]"The demand for contiguous space blocks of 25,000 feet or more is tremendous, but there is virtually nothing available in that category," in Hollywood, Tronson says. He notes that the overall vacancy rate stands at about 7% in Hollywood and that space is mostly appropriate for small, entrepreneurial tenants rather than larger, more high-profile companies. Office vacancy rates hover around 5%, and both office and retail rents have grown about 40% on average in the past 24 months, he reports.

Several major developers have already moved to address that need for large corporate space, Tronson points out. Among them are the Los Angeles-based J.H. Snyder Co.'s 200,000-sf low-rise campus project at 959 Seward; CIM's high-end 200,000 sf office building at 1635 Highland Ave. and Argent/Millenium's plans for its Capitol Records superblock site on Vine Street. Other projects described in recent GlobeSt.com reports include the Clarett Group and James Nederlander's plan to develop a 10-story, 200,000-sf office tower above the Pantages Theatre, a famed Hollywood venue that is next to a $400-million, mixed-use green development called Blvd6200 that the Clarett Group already has in the works. In addition, the CIM Group's project in nearby West Hollywood, called the Lot, envisions a 400,000-sf class A office development at the site of the former Warner Hollywood Studios on Santa Monica Boulevard.

In the residential/retail mixed-use category, the major projects include Camden REIT's 400,000-sf mixed-use development on the southeast corner of Hollywood Boulevard and Selma Avenue, which will include 300 apartments over a 65,000-sf Whole Foods Market. Across the street will be a Trader Joe's Market anchoring the Vine Street frontage of the Legacy Partners' W Hotel, which will include 350 apartments, 150 condos and 80,000 sf of retail.

Adjacent to these projects is the biggest of them all, the 1.1-million-sf Blvd6200, on Hollywood Boulevard, including 1,000 residential units and 175,000 sf of retail. Tronson sees continued growth of the retail sector in Hollywood, pointing out that Tesco, Urban Outfitters, Zara and Napoleon Perdis have recently signed lease commitments and stores that are vacant are being courted by the likes of Nike, Electronic Arts and MySpace. He credits CIM for efforts to make Hollywood a premier, cosmopolitan shopping destination in the midst of a variety of residential and entertainment venues.