Falling Vacancies

By Ed Moosbrugger

The worst may be over for the Downtown office market after vacancies, including sublease space, hit 20 percent a few months ago. But while the market has stabilized and shows signs of improving, it is still a renter’s market.

“If you are a good tenant you have tons of leverage,” said Randy Starr, principal with Tenzer Commercial Brokerage Group Inc.

Opinions differ on just how much improvement is taking place in the Downtown office market.

“It hasn’t gotten any better,” said Vincent Muselli, owner of Muselli Commercial Realtors. “It’s just mostly people looking around within the marketplace.”

Robert O. York, a consultant for the Bayside District Corp., said the market appears to have stabilized and is slowly improving, although there is no interest in starting new office projects right now.

Starr said the market has begun to absorb space and he estimated vacancies have fallen to about 14 percent, including sublease space, from 20 to 22 percent about four months ago.

“All the sublease space is filling up,” said Starr, who expects the vacancy rate to fall further.

Because of all its amenities, including numerous restaurants, Downtown Santa Monica office space should begin to fill up before less attractive areas, Starr said. Uncertainties remain in the Downtown market, however, with some new office buildings nearing completion.

Meanwhile, the retail leasing market is holding up pretty well, although retailers are more cautious in doing deals and have more stringent criteria than a couple of years ago.

“It is still a very cautious business environment,” York said, but “there are still a number of significant deals being done. We’re healthy. We’re stable.”

Potential retail tenants are still coming to look but they are being very particular about where they go, said Barbara Tenzer, owner of Tenzer Commercial Brokerage. It wasn’t too long ago that many retailers thought they had to be on the Third Street Promenade no matter the cost, but now they are rethinking the situation and probing deeper, Tenzer said.

That includes seeing how many people walking the streets are carrying shopping bags.

One turnoff for retailers is the growing problems caused by transients, Tenzer said, calling it “the big issue” Downtown.

Muselli said the retail market Downtown is pretty tight, although there are some large spaces on the Promenade that are not leasing.

“The retail market in Santa Monica is pretty good,” he said, citing low vacancies on such streets as Wilshire Boulevard and Fourth and Second streets.

VISITORS to Santa Monica have a new place to get information on the city’s attractions, and tourism officials hope it will give a boost to local business.

The Santa Monica Visitors Center, located on the second floor of Santa Monica Place near Robinsons-May, will celebrate its grand opening on Aug. 9 at 2:30 p.m.

The Santa Monica Convention & Visitors Bureau has signed a five-year lease for the 1,513-square-foot walk-in center, located in a space formerly occupied by the Japan Travel Bureau.

The center, designed by AkarStudios of Santa Monica, is run by a multilingual staff and includes instant hotel reservation services, and interactive computer displays with information on transportation, hotels, restaurants, shopping districts and attractions. Internet access and a retail outlet are planned soon.

“Our goal is to convert the important walk-in visitor into an extended stay by selling citywide attractions and hotels,” said Debbie Lee, director of communications for the visitors bureau.

The visitor center is “a way to drive traffic to the marketplace and community,” said Charlie Christensen, general manager of Santa Monica Place. “We’re going to advertise the fact that we are here.”

Roger Van Helden, who speaks six languages fluently, has been appointed manager of the center, which will be open daily from 10 a. m. to 4 p.m. The Palisades Park kiosk will remain open.

HOTEL ACTIVITY continued to be mixed in Santa Monica in May. While the occupancy rate rose 10 percent from a year earlier to 76.8 percent, the average room rate fell 9.1 percent to $192.58. Santa Monica had one of the highest hotel occupancy rates in Los Angeles County during May but also had one of the biggest drops in room rates.

For the first five months of 2002, Santa Monica’a hotel occupancy rate rose 6.8 percent to 76.6 percent, while average room rate dropped 11.5 percent to $193.04, according to a report by PKF Consulting.