Office Market Upswing?

Ed Moosbrugger

March 8 -- Leasing activity in Downtown Santa Monica appears to be looking up in both the office and retail markets, but opinion is not unanimous on that point.

On the office scene “the market is very active right now,” said Randy Starr, a principal in Tenzer Commercial Brokerage. “For the first time in a couple years brokers are calling me for space, particularly in the 1,000 to 4,000-square-foot range.”

“Small companies want to be Downtown,” Starr said.

The Downtown office market has improved from a year ago, and the activity is pretty broad based, said John Warfel, a principal in Metropolitan Pacific Commercial Real Estate Service.

Indeed, Downtown seems to be doing better than some other areas.

Office leasing rates Downtown have firmed up, but are still pretty soft east of Downtown, said Warfel, who believes Downtown benefits from being near the
ocean and having amenities such as restaurants.

Rates have gone up in recent months, and what has been a renter’s market for a few years is now becoming more of an even playing field, Starr said. Office rates now range between $2.70 and $3.75 a square foot a month, compared with $2.25 to $3.50 a year ago, he said.

But Vincent C. Muselli, president of Muselli Commercial Realtors, has a different take on the market, saying rents haven’t gone up and the market is “flat” with last year. He puts the office vacancy rate at 14 to 15 percent, the same as a year ago.

Starr estimated that the office vacancy rate Downtown has fallen to about 10 percent and should drop to 8 percent within a few months based on current activity. He thinks that the office market has benefited from the success of the Third Street Promenade, which he said is “better than ever.”

On the retail front, activity has picked up since last year on both the Promenade and surrounding streets, said Warfel, who chairs the Bayside District board.

“Retail continues to be in demand,” said Muselli, who estimated the vacancy rate at 2 to 3 percent.

There’s been some good leasing activity on the Promenade in the past couple of months, reported Rob York, a consultant for the Bayside District Corp. He
expects almost every space on the Promenade to be occupied by the end of the year.

One big plus is the leasing of the former UCLA Extension space, which will be occupied by Zara, a fashion forward men’s, women’s and children’s apparel chain based in Spain, York said. Zara will open a multilevel, high-profile store.

Prospective tenants see the Promenade as a successful area, said Barbara Tenzer, head of Tenzer Commercial Brokerage, who also noted the positive comments from consumers in a recent survey done for the Bayside District Corp.

The picture is mixed on the streets around the Promenade.

Santa Monica Boulevard has developed well; 4th Street has been a mixed bag; and 2nd Street has had some difficulty attracting retailers, Tenzer said.

Fourth Street is probably next in terms of retail leasing activity after the Promenade, York reported. One big change is the two-level Circuit City store that will go into a former bank building at 4th Street and Arizona Avenue.

The Wasteland, a vintage clothing and collectibles store, has taken 4,700 square feet of space at 1338 4th Street in a lease handled by Muselli’s firm.

There also has been some retail interest in a building under construction just south of the Michaels arts and crafts store on 4th Street, York said. “That will be a really good addition to that block,” he said.

York also noted some progress on 2nd Street, where Equinox, a high-end health club, will take a big chunk of space in an office building at the northeast corner of Santa Monica Boulevard and 2nd Street.

AMERICAN FILM MARKET leaders were pleased as their 24th annual trade show approached the start of an eight-day run at the Loews Santa Monica Beach Hotel on Feb. 25, reporting that all of the exhibition space had been sold out.

Meanwhile, the AFM was expected to announce soon that it will stay in Santa Monica beyond 2004.

Some 291 film and television companies, including a record 88 first-timers, exhibited at the current market. The total was up 14 percent from last year.

“We are delighted with the strong response to this year’s AFM,” said Jean M. Prewitt, president and chief executive officer of AFMA, the Westwood-based trade group that produces AFM.

About 7,000 people were expected to register for AFM, giving a boost to Downtown hotels, restaurants and other businesses.