Downturn creates glut of trendy office space
A year ago, it was impossible to find decent office space in the trendy high-tech districts, with rents skyrocketing to more than $5 per square foot, and prime space often causing bidding wars.
But that was last summer.
With the demise of dozens of Netcos, office space in hot multimedia areas such as Santa Monica and Culver City is back on the market — and at a discount rate. Get lucky enough, and renters even get bonuses like installed phone systems and office furniture left behind.Vacancy rates in Santa Monica have grown from about 1% last June to between 6% and 12% today. Rents have plunged to $3 per square foot in once high-demand areas. And some defunct dot-coms desperate to sublease their way out of expensive long-term rentals are undercutting even that figure. But at bargain prices, is there anyone left to pay the rent?
So far, no.
- The foreboding brick warehouse on Broadway in Santa Monica that once housed online entertainment venture Digital Entertainment Network boasts locked metal gates that keep visitors away from a front entry littered with old newspapers. Weeds have laid claim to the cracks in the sidewalk.
- Hidden behind the See’s Candy factory on La Cienega in Culver City, the ultra-modern offices of Icebox.com are now empty. The only sign of the defunct Netco is a two-toned blue sign on the street, and the company’s name spray-painted on a few parking blocks. Inside, bare concrete floors and lime green walls are broken only by an occasional white board.
- The same is true for the orange stucco home of Z.com in Burbank. That building has remained empty since the company’s closure earlier this year. A single phone on the silver receptionist’s desk is the only remaining piece of equipment, unless you count the open sofa bed in the deserted parking lot.
The problem isn’t finding tenants to fill up empty buildings. The challenge is finding new tenants willing to live with dot com aesthetics.
“A lot of the space that these firms are in are very creative, funky, fun work environments that the traditional companies are not used to,” says Colliers-Seeley broker John Bibeau.
As start-ups drop off the radar, old economy players such as law firms and more traditional entertainment companies are scooping up the good deals. HBO and Sony Pictures Digital Entertainment are rumored to be searching for new office space on the west side, as is a large Westwood law firm.
But don’t dismiss the dot coms. Eureka Broadband, a high-speed Internet access provider, has set up shop inside DEN’s former canary yellow offices with the requisite high open ceilings and exposed ventilation system. EToys may be bust, but across the street, News Digital Media is still operating inside its posh concrete and steel warehouses. And iFilm, among others, remain in their refurbished Hollywood lofts.
“We were really frugal,” says iFilm’s Melissa Zuckerman. “We didn’t get this huge ocean front property in Santa Monica.” Still, iFilm subleases some of its 25,000 square feet to a Web design firm, and says they are looking for more tenants — a plan they’ve had since leasing the building last year.
“The outlook has been doom and gloom,” says Michael Teller, executive veep of First Property Realty. “We were living in a false sense of reality where companies were gobbling up space that they had no business taking up.”