August's Industry Dirt

Well, it looks like all of the “fun” news of mergers and icons selling their properties all wrapped up in time for the August vacation exodus. But fear not, real estate never sleeps.

In this issue, we share who is going where, profile the Santa Monica submarket, and more.

Let’s go!

-Ted Simpson

CRE NEWS AROUND TOWN

Absurd Ventures, a storytelling and digital media company based out of Los Angeles, has agreed to take over the remainder of Luma Pictures' 24,280 square foot lease in the Promenade Gateway, 1451-1457 3rd Street Promenade, Santa Monica. Absurd Ventures was founded in 2024 by Dan Houser, a co-founder of Rockstar Games, the video game company responsible for games such as Red Dead Redemption, Grand Theft Auto, and Bully. Maxxam Enterprises owns the company's new sublease, a mixed-use project built in 1989 with first-floor retail, Class A office and creative space, and residential apartments for lease. (Source: Costar)

Digital media company and America's largest digital and print publisher, Dotdash Meredith (brands include PEOPLE, Better Homes & Gardens, Verywell, etc.), signed a new 19,943 square foot lease on the second floor of Formosa South (1041 N Formosa Ave, West Hollywood) for an eight-year term. The publisher is joining HartBeat, comedian Kevin Hart's entertainment company, as cotenants in the Class A, LEED Gold-certified office property designed by architects Studio One Eleven. (Source: Costar)

New Wave Entertainment, an employee-owned entertainment marketing company, has relocated its offices to 4411 W. Olive Ave., Burbank, taking all 45,936 square feet at the former Warner Brothers headquarters near the Walt Disney Studios, Warner Brothers Studios, and NBC Universal. Constructed in 1991 and owned by the Los Angeles-based ICO Development, this single-tenant property features a secured subterranean parking structure that includes electric vehicle charging, a sky-lit atrium, and outdoor balconies. Sources tell me the 128-month lease has a monthly rent of $2.45, per RSF, NNN (Nets are $1.45) with 3% annual increases and includes parking. New Wave also received eight months of free rent and a $75 per RSF Tenant Improvement Allowance. (source: Costar)

9000 Wilshire Blvd in Beverly Hills is a brand new four-story creative office building. The building occupies a corner site roughly midway between new subway stops now under construction at Rodeo Drive and La Cienega Boulevard. FanDuel bought the building from the builder, Skanska USA, in January of this year for $71 million. The completed development features 50,148 square feet of offices and ground-floor commercial uses, seated atop a subterranean parking garage. Designed by LA-based architect Neil M. Denari and HLW International, the building features floor-to-ceiling glass windows. Already partially leased by FanDuel, floors 3 and 4 are still available, clocking in at about 22,227 square feet of available space. (source: Urbanize Los Angeles and The Real Deal)

CREA’s SANTA MONICA SUBMARKET BREAKDOWN

Santa Monica and the Marina Del Rey/Venice submarket, known as Silicon Beach, remain a hub for tech and creative firms, including Hulu and Snapchat, along with countless startups. However, like many Greater Los Angeles submarkets, Santa Monica is going through some contraction and growing pains.

Santa Monica experienced a record-high vacancy rate of 20.0% in the third quarter of 2024. Tenants are vacating spaces at the end of their leases, downsizing, and listing spaces for sublease, resulting in a net absorption of -230,000 SF over the past year.

Sublease availability is at 6.2% of total office space (one of the highest in Greater LA), with rates dropping to almost 50% compared to those pre-2020.

Office sales have remained below their historical averages, although major transactions like the Pen Factory and 1540 Second St highlight the area's high pricing for office assets. The 220,000 square foot Pen Factory (2701 Olympic Blvd) was the largest office transaction in the submarket last year and just closed at the beginning of this month when JP Morgan Asset Management acquired it from CalSTRS for $178 million ($810/SF).

Santa Monica Submarket Indicators (Q3 2024):

• Vacancy Rate: 20%

• Average Asking Rent: $5.03 SF/month (FSG)

• Net Absorption: -54,744 SF (12-month Net Absorption: -233,000 SF)

• Construction Activity: 42,023 SF Under Construction

NEW TO THE MARKET

Last week, 2101 Wilshire was quietly put on the market. Rarely do small, boutique buildings become available for sale in Santa Monica, especially with a brand-new facelift. This standalone building is approximately 27,916 rentable square feet with 60 surface parking stalls. It will be listed at $36,000,000 ($1,289.58/SF), which is about market. DM me if you’re interested or want more details.

INTERESTING AVAILABLE SPACE IN SANTA MONICA

Despite a bad stretch, developers are still investing in Santa Monica. The below two boutique-ish and architecturally interesting buildings represent the top entertainment opportunities in Santa Monica (IMHO). 

1650 Euclid St

With approximately 65,000 square feet of available space and a beautiful roof deck with views, this space is worth checking out if you want to be on the Westside. The monthly rent is $5.95 NNN, per SF.

1640 14^th Street

I feel like if Santa Monica was an office building, this is how it would look. Featuring a beautiful blend of indoor and outdoor space, this could be the space to finally get your employees back to the office. The monthly rent is $5.95 NNN, per SF.

RUMBLINGS

WSJ article on cosmopolitan financier Arki Busson setting up his $1 billion production studio in working-class Bayonne, New Jersey. With his ambitious 1888 Studios project, Busson plans to re-create the Golden Age of Hollywood.

Thanks for reading. If you want me to look into something or have some ideas for the newsletter, let me know, and I’ll get right back to you.

Ted Simpson
Founder and CEO
Commercial Real Estate Advisors
(c) +1 310.384.6512 |(e) [email protected]
CA DRE License #0109718

P.S. Whenever you’re ready, here are 3 ways I can help you with your real estate.

1. A new home for your business. So, you want to move, but you don’t know the market. I can help.

2. Time to renew your lease? Don’t quite trust your landlord? Consider me your personal polygraph. BTW, I recommend starting the lease renewal process six months out at a minimum.

3. Sublease your space. You’ve outgrown your space and need to move but don’t want to pay two rents? I got you.