The Real Deal Los Angeles

Submarket Snapshot: Hollywood’s office market in Q1 2016

Area saw high vacancy, big leasing and investment
By Hannah Miet | April 04, 2016 05:00PM

Hollywood q1 2016

Credit: NGKF

Hollywood was home to Los Angeles County’s largest lease of the first quarter of 2016, according to a new report by NGKF.

In February, Netflix expanded upon what was the second-largest lease of 2015 to take the remaining 123,221 square feet at Hudson Pacific Propertiesunder-construction Icon building at 5808 West Sunset Boulevard.

The largest investment sale was Tishman Speyer’s acquisition of the CNN building at 6430 West Sunset Boulevard for roughly $130 million, or $622 a square foot. Second in line was Clarion Partners’ purchase of the two-building Kodak Hollywood Campus for $61.3 million, or $574 a square foot.

The overall weighted average asking rent at Hollywood office buildings closed the first quarter at $4.10 a square foot a month, up 3 cents from the previous quarter and 52 cents from the same time last year.

The average asking rent has increased by 14.5 percent over the last four quarters.

Net absorption totaled 60,137 square feet in the first quarter, compared to negative absorption in the previous quarter.

The overall vacancy rate spiked in recent quarters alongside vacant deliveries. It rose from 17.2 percent in the previous quarter  to a whopping 27.1 percent in Q1. The vacant delivery of Kilroy Realty Corporation’s 355,011-square-foot Gower and El Centro buildings at Columbia Square added to that trend.

According to NGKF, vacancy rates are likely to decrease because the vacant projects are 57 percent pre-leased with tenants moving in later this year. Almost 74 percent of the 443,624 square feet of office space that is under construction now in Hollywood is also pre-leased.