Large consolidation paves way for higher rents
Douglas Emmett, along with QIA (Qatar Investment Authority), an 80 percent partner, purchased the four-building EOP/Blackstone-Westwood portfolio. The estimated purchase price was $1.3 billion with a 3.7 percent cap rate. The buyer, Douglas Emmett, already owned two properties, previously representing 15.0
percent of the market in Westwood. With the four-building addition, they now control 78.0 percent of the Class A office stock along Wilshire Boulevard. The combined portfolio has 12.9 percent vacancy and an average gross asking rental rate of $4.55 p.s.f. With control of so much stock, it would be plausible that ownership would continue to push rates.
El Segundo gets creative and tenants respond favorably
Creative office properties and build-outs have resonated with a wide range of users throughout Los Angeles. As this trend expands both geographically and across industry sectors, more and more office micro-markets are joining in the trend. El Segundo, which lies just south of Playa Vista has been slowly adding creative square footage to its office base. There is currently 2.3 million square feet of existing creative product in the market and an additional 1.2 to 1.6 million square feet of conversions either under way or in the planning phases. Since 2014, and despite commanding an 18.8 percent rental rate premium over traditional Class A El Segundo office product, the market has seen consistent positive net absorption.
Media and entertainment drive leasing activity
The media and entertainment sectors accounted for over a third of all leasing activity during the first quarter. Large entertainment transactions included distributer and producer Netflix signing a 123,300 square foot lease in Hollywood while talent agency International Creative Management (ICM) signed for 108,300 square feet in Century City. A series of box office hits has bolstered the entertainment industry. The expansion and extension of the California Film & Television Tax Credit Program will help underpin future growth in the entertainment industry by significantly curtailing runaway productions.
For more information contact Henry Gjestrum