Santa Monica's office market is heating up, like the sun and the sand surrounding this California seaside municipality.
Santa Monica's office-vacancy rate fell to 11.5% in the fourth quarter, from 14.3% in the same period a year earlier, according to recent data from Grubb & Ellis Co.
At the same time, vacancies for overall Los Angeles County remained at a recessionary peak of 17%.
Why is Santa Monica, a city of 84,000 residents, playing a starring role in the Southern California office market?
Entertainment firms specializing in film post-production are flocking to adjoining areas of Los Angeles's Westside to better recruit new talent.
Hollywood workers want to live near the beach.
Riot Games is relocating its 200 employees to 60,000 square feet in Santa Monica's Yahoo Center campus from 23,000 square feet in Culver City.
Santa Monica also is filled with low-rise buildings such as the fully leased Lantana Media Campus that entertainment companies prefer.
Yahoo Center, Santa Monica, CA
Nationally, the office market began to recover in 2010, with the U.S. vacancy rate dipping to 17.7% in the fourth quarter from the recession's peak of 17.9% in both the first and second quarters, according to Grubb & Ellis. In 2009's fourth quarter, the rate was 17.4%.
A number of other markets outperformed the overall market.
In the San Francisco Bay area, Palo Alto's office vacancy rate of 9.9% in the fourth quarter was lower than those of most other cities, including San Francisco's 15.5%.Palo Alto is home to fast-growing tech firms.
Modest price increases are being reported in some of these markets, including in Santa Monica, where asking rents for the most-expensive spaces rose 0.5% to $3.26 a square foot in the fourth quarter, from $3.07 a year earlier.
The most-expensive rents for Los Angeles County fell 1% over the same time. Santa Monica rents had fallen by about one-half since 2007.