Hollywood’s office market is in a transitional phase.
It hasn’t quite filled up its new office product, hence its 24.7 percent vacancy rate in the second quarter — and a whole lot more is on the way.
The area had a whopping 622,950 square feet under construction in the second quarter, according to a report by Transwestern.
With a vacancy rate even higher than Downtown’s Bunker Hill — which has historically been one of the submarkets with the most empty space — you’d think landlords would lower the rent in hopes of getting tenants. But that hasn’t happened. At least, not yet. Asking rent in the second quarter was $4.20 a square foot a month, according to Transwestern, making Hollywood the most expensive submarket outside of L.A.’s Westside, which averaged $4.63. The average for the L.A. metro area was $3.12.
Why not lower rents? The problem is that a lot of the empty product is new and expensive, with luxury amenities. It was pro-forma-ed for top dollar rents. Will it ultimately get them? We’ll have to wait and see, as the new product has not been sitting on the market for very long.
Hollywood saw negative absorption of 25,487 square feet in the second quarter, despite a lot of leasing activity in previous quarters. Last quarter, Netflix leased the entirety of Hudson Pacific Property’s under-construction Icon building.