real estate quarterly stagingonlyinhollywood.org/wp-content/uploads/2015/03/labj-hollywood-st… ·...

OWEVER dazzling an imageHollywood has projected to theoutside world, locals know thetruth: For a long time, it wasmore grit than glam.

Until the turn of the century, the 3.5-square-mileneighborhood was a haven not only for flocks oftourists but also for crime, grime and more homelessyouth than any other place in Los Angeles.

“When I came here 21 years ago, things were in asad state of affairs,” said Leron Gubler, chief executiveof the Hollywood Chamber of Commerce. “Peoplewere embarrassed to say they lived here.”

That situation has since changed in a big way. Today,

Tinsel Town is starting to live up to its reputation.Developers have together committed nearly $4 bil-

lion to the construction of major projects in Hollywood.More than 25 ground-up construction projects – includ-ing as many as 12 towers rising more than a dozen sto-ries each – are in various stages of planning or con-struction in the area. In addition, at least 10 existingbuildings have been slated for extensive renovation,conversion or expansion.

New construction alone promises to add:• More than 2.2 million square feet of office space,

or the equivalent of 1.5 U.S. Bank Tower buildings.• About 650,000 square feet of retail, or as much as

the Grove and the adjoining Farmers Market.

• Up to 4,550 apartment units, about 300 more thanthe 45-building Park La Brea complex on Third Street.

• Up to 1,050 hotel rooms, as many as L.A. Live’ssleek JW Marriott Los Angeles and Ritz-Carlton LosAngeles hotels combined.

That’s not the end. Beyond the new construction,redevelopment or conversion of existing buildings willrenew an additional 540,000 square feet of office space,420,000 square feet of retail, 437 apartment units and550 hotel rooms.

The most recent project to reach completion, andone that set a high bar for the area – is the new campusof Boston’s Emerson College. The $110 million build-ing, designed by architect Thom Mayne of Morphosis,

Los Angeles Business Journal • April 21, 2014 • Special Report Real Estate Quarterly

HPlease see page 22

DIGGING IN: Site of Camden Property Trust’s$140 million luxury apartment project.

STAGINGCOMEBACK

Residential, retail developerslook to get in on act asHollywood’s star rises.

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Alsoin thissection:

Hotel developersadd projects largeand smallPAGE 30

L.A. Countyoffice andindustrial marketsPAGE 31

Leasingand sales bysubmarketPAGES 32-40

By BETHANY FIRNHABER Staff Reporter

21_28_req_main.qxp 4/17/2014 2:50 PM Page 21

22 LOS ANGELES BUSINESS JOURNAL APRIL 21, 2014

was called by Los Angeles Times architecturecritic Christopher Hawthorne “one of thefirst really ambitious pieces of architecture tobe finished in Los Angeles since the reces-sion.” It opened earlier this year.

Developers cataloged at least a half-dozenfactors that drew them to Hollywood: Its cen-tral location, walkability, proximity to transithubs, the nearness of all the major entertain-ment studios, a diverse employment pool andgreat amenities.

Those conditions, coupled with a revivingeconomy and the release of pent-up demand,have fed the growth.

“A lot of it goes back to the fact thatwe’ve seen so little commercial real estatedevelopment since the onset of the recession,”said Kimberly Ritter-Martinez, an econo-mist with the Los Angeles EconomicDevelopment Corp. “We’ve seen a renais-sance in development, particularly residentialdevelopment, not just in Hollywood but indowntown Los Angeles and other core urbancenters. People want to come back and live inhigh-density urban environments that areclose to their jobs.”

The activity is not happening in a vacuum.Since the formation of several area businessimprovement districts in the ’90s and thecompletion of the Metro Red Line in 2000,the sad Hollywood that Gubler rememberedhas largely become a thing of the past.

For much of the last decade, communityadvocates and L.A. city officials workedtogether to draft a community plan that woulddirect the neighborhood’s future as a thrivingurban hub. The plan, approved in 2012, calledfor greater density around transit nodes while

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1. Millennium Hollywood West2. Millennium Hollywood East3. Yucca Development4. Argyle Hotel5. Champion Apartments6. BLVD 6200 - Phase 1 (Eastown)7. BLVD 6200 - Phase 28. Taft Building9. 1601 Vine10. Camden Apartments11. Sunset Media Center12. Ametron Tower13. Hollywood Palladium Residences14. Columbia Square15. Essex Hollywood16. Emerson College17. Icon office building

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Continued from page 21

Please see page 24

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HIGH BAR:New campusof Boston’sEmersonCollege onSunsetBoulevard.

limiting development in residential areas.But even as city leaders pushed for a big-

ger, brighter Hollywood and developersexpressed enthusiasm for the market withtheir wallets, aggressive community activistspushed back.

Late last year, a judge in a case against aHollywood developer ruled that the recentlyapproved community plan was “fundamental-ly flawed” because it was based on inflatedpopulation numbers not substantiated by gov-ernment data. As a result, granting of buildingpermits for construction in Hollywood cameto a temporary halt early this year.

Still, developers are intent on building a newHollywood. Gubler said they’re not lettingdelays deter them; instead, many are modifyingproposals to follow through with their vision.

“There’s more (development) happeningnow than at any other previous point, evenbefore the recession,” he said. “Things arecoming together the way we had alwayshoped. You could say the stars are in align-ment for Hollywood.”

Towering achievementsMany of the biggest ground-up projects

being developed are within a two-block radiusof the Metro station at Hollywood Boulevardand Vine Street, including at least seven high-rise towers.

Joe Mariani, director of business develop-ment and strategic initiatives for both theHollywood Entertainment District BusinessImprovement District and the Sunset andVine Business Improvement District said thenumber of apartment units in those concentrat-ed commercial areas has more than doubledsince 2000 and is expected to double again inthe next couple of years. Before 2000, therewere only 1,700 residential units. By this year,that number had grown to more than 4,000units, and another 4,000 units are on their way.

Contributing to the dense subwaycentricdevelopment are four high-rise towers – oneof them already under construction – havebeen proposed for an area a block south ofthe Hollywood and Vine station.

Earlier this year, West L.A. real estateinvestment trust Kilroy Realty Corp. brokeground on Columbia Square, carrying on thename of the historic former offices of CBSStudios once housed on the site. Expected tobe completed in the first half of 2016, the 4.7-acre campus will include 445,000 square feetof office space and a 20-story residentialtower with 200 units.

David Simon, Kilroy’s executive vice presi-dent, said the company was able to move quick-ly on the project – despite its historic elementand massive scale – because the site already hadan approved development agreement.

“When we bought the property, it had a 15-year development agreement in place for 875,000square feet, and we lowered that,” he said.

Immediately west of the Columbia Squaresite is another project that proposes buildingaround a landmark structure. Miami luxury-living developer Crescent Heights wants tobuild two 29-story residential towers immedi-ately north and west of the art decoHollywood Palladium. The developer, whohas promised to seek historic designation forthe concert venue, has had meetings withcommunity groups and is awaiting PlanningDepartment approval to bring either 731apartments to the market or a mix of apart-ments and hotel rooms.

On the same city block is yet anotherpotential tower development. Fred Rosenthal,owner of production equipment supplierAmetron Electronics, has proposed building a20-story tower with 170,000 square feet of


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Please see page 26


‘Things arecoming togetherthe way we hadalways hoped.You could saythe stars arein alignmentfor Hollywood.’LERON GUBLER,Hollywood Chamberof Commerce

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office space and 50,000 square feet of retail.And across the street, Palo Alto real estate

investment trust Essex Property Trust Inc.submitted plans to the city in March to build200 apartments at 6230 W. Sunset Blvd., siteof the 1930s-era Earl Carroll Theater, whichis has said it would incorporate and preserve.

Stoking housing stockThe single largest contributor to the rise in

housing stock in Hollywood is a massive retailand residential project by Century City firmClarett West Development. Phase one of thetwo-phase project at 6201 Hollywood, former-ly called BLVD 6200 but now called Eastown,is on track to open this summer with 535 apart-ments and 75,000 square feet of ground-floorretail. Phase two of the $400 million project is

expected to begin shortly thereafter, bringinganother 535 units to market. Clarett has alsofinished renovating the 12-story Taft officebuilding at 1680 N. Vine St.

Developer Camden Property Trust ofHouston, which recently broke ground on aproject a block south of the Hollywood andVine Metro station, will bring another 287 lux-ury units to the market with its $140 millionapartment building. And just down the street,not far from the Metro station at Hollywoodand Highland Avenue, Champion Real EstateCo. of Brentwood has nearly 500 more unitsacross three different projects in development.

In addition to those projects already in theground, there are others champing at the bit,only to have been held up by litigation overconcerns about a potential seismic faultbeneath the neighborhood.

Millennium Hollywood, the tallest projectproposed for the area – and the most contro-versial – might one day rise less than a blocknorth of the Hollywood and Vine station. NewYork developers Argent Ventures andMillennium Partners plan to build towers of35 and 39 stories flanking the iconic CapitolRecords building at the intersection of Vineand Yucca streets. Community groups and thenearby W Hollywood Hotel & Residenceshave sued to halt the $664 million project overconcerns that the site might sit on unknownfault lines as well as over complaints that thedevelopment will generate too much traffic andobscure views. The developers are still work-ing through the litigation, but in the meantimeare beginning early marketing efforts to lease215,000 square feet of office space and 85,000square feet of retail space that the towers areexpected to bring to market.

Philip Aarons, a co-founder and principal atMillennium, said in an email that the developersare firmly committed to building the project.

“Although the current litigation has slowedus down, we are confident that we will prevailin court and be able to begin constructionsoon,” he said.

Neighboring the site of the Millenniumtowers projects is a smaller parcel where SSVProperties, also known as Second StreetVentures, long ago proposed building a 16-story residential tower.

David Jordan, the Burbank real estatecompany’s president, might be the most deter-mined developer in Hollywood. His projecthas been in the works for nearly a decade,longer than any other project on the docket.After getting entitlements for the $50 millionproject years ago, he was held up by therecession and, later, a lawsuit. Now, he’s wait-ing out an appeal filed by a community groupthat called out his project for allegedly skirt-ing seismic requirements. To assuage theirconcerns, he voluntarily dug a trench insearch of earthquake fault lines and expects topublish the results in coming weeks.

“We feel confident that the trenching willshow we do not have a fault under or aroundour property,” he said.

He hopes to break ground in the next cou-ple of years.

Office opportunityDemand for housing in the area and resi-

dential developers’ eagerness to fill the needhas helped fuel interest in adding to theroughly 2.3 million-square-foot office market.

Office development, said Nicole Mihalka,a senior vice president for Jones LangLaSalle Inc., is the next reasonable step.Mihalka, who has worked in the Hollywoodmarket for more than a decade, representsseveral landlords with new or refurbishedoffice stock in the area, including Kilroy andLincoln Property Co. of Dallas.

“Lately, tenants with requirements from20,0000 square feet to 100,000 square feet arelooking at Hollywood,” she said. “We didn’thave the supply for that large a tenant forquite a long time, but now there’s so much


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Please see page 28

CHANNELINGHISTORY:David Simonat Kilroy’sColumbiaSquare projectat the siteof formerCBS Studiosoffices.

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NEXT ACT:Rendering, left,of HudsonPacific’s officeand retailtower. VictorColeman atSunset GowerStudios.


development coming we finally have space.”In addition to its Columbia Square project,

Kilroy also owns a 4.7-acre development site,purchased from the Academy of MotionPictures Arts and Sciences earlier this year,and the 22-story Sunset Media Center officetower at 6255 W. Sunset Blvd. The companybought the latter building in 2012 for about$76 million and is now putting the finishingtouches on its $15 million renovation.

Lincoln Property also recently renovated anoffice property that once served as headquar-ters for Eastman Kodak Co.’s West Coastheadquarters; Australian audio engineeringschool SAE Institute was the first to sign alease there, for about 41,000 square feet.

Miracle Mile developer J.H. Snyder isbringing brand-new office stock to

Hollywood with two projects – one at 1601N. Vine and another at 959 Seward St.Together, the two projects will bring 359,000square feet of office space to the market. Theformer is expected to break ground thismonth; the latter broke ground last month.

Indeed, despite the redevelopment of theformer Kodak and AMPAS spaces,Hollywood remains a hub for developmentcatering to the entertainment industry.

“The entertainment industry in LosAngeles is doing well,” said the LAEDC’sRitter-Martinez. “Motion picture and soundrecording industries are adding jobs, and on-location film permits are trending up. We’restill not where we were before the recession,but we’re seeing more activity in filming.”

Responding to that, all of the developersbuilding or renovating office space inHollywood claim to be courting similar ten-ants: creative media, entertainment, technolo-

gy and ad companies, including pre- andpostproduction firms.

Kilroy, for example, which also does a lotof development work in the Bay Area, isaggressively courting Silicon Valley compa-nies that might be interested in openingoffices in Los Angeles to merge technologyand content production.

“There’s plenty of commodity office spaceall over the place in Los Angeles, but if you’rea creative company that needs an environmentthat will keep your workforce engaged andinspired, that’s what our company does up anddown the coast,” Simon of Kilroy said.

Hudson Pacific Properties Inc., whichbetween its Sunset Gower Studios and SunsetBronson Studios owns and operates about 30acres of studio space, is similarly counting onthe convergence of entertainment and technol-ogy, seeking companies that need productionspace and value having a Hollywood address.

Victor Coleman, Hudson Pacific’s chiefexecutive, said the company is planning toexpand its office and production capacity onstudio land it owns along Sunset. The WestL.A. REIT has entitlements for a 14-storyoffice tower at Sunset Bronson Studiostotaling 315,000 square feet as well as a90,000-square-foot production facility.Furthermore, for Lot A, a site just west ofSunset Bronson, Hudson Pacific is seekingentitlements to build Icon, a 17-story towerwith 274,000 square feet of office and about26,000 square feet of retail; it expects tobreak ground later this year.

“When we bought 30 acres of studio landin Hollywood, we had a long-term vision,”he said. “The media and entertainment bub-ble was always sort of around in that area,but it hadn’t grown yet. Now, it’s all comeback and it’s thriving because of demand bytechnology companies.”

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By BETHANY FIRNHABER Staff Reporter

DESPITE its reputation as a majortourist attraction, Hollywood hasn’talways had the hotel rooms to

accommodate its many millions of visitorseach year. But as development booms in thearea, that’s poised to change.

Along with millions of square feet ofoffice, retail and residential space in develop-ment in Hollywood, at least nine hotels are inthe planning stage or under construction.Together, they promise to bring more than

1,200 new guest rooms to the area, anincrease of more than 31 percent to the mar-ket’s existing 3,825 rooms.

Ernest Wooden Jr., president and chiefexecutive of the Los Angeles Tourism &Convention Board, said Hollywood – and LosAngeles in general – can certainly use theadditional inventory. At 81 percent occupancylast year, Hollywood hotels exceeded the coun-tywide average by nearly 5 percentage points.

“We need hotels in Hollywood, as we doacross the L.A. region,” he said. “We’ll needabout 3,000 more hotel rooms countywide tobe able to accommodate the demand that willcome with our goal of 50 million annual visi-tors to Los Angeles County by 2020.”

Three of the nine new inns in Hollywoodwill have about 200 rooms, including thehotel component of the towering MillenniumHollywood project.

The Argyle Hotel, with 210 rooms, will bethe largest by room count. San Francisco hos-pitality company Kimpton Hotels &Restaurants is expected to begin construc-tion in the next couple of months to convertan old office building at 1800 N. Argyle Ave.into one of its signature boutique hotels.

The other 200-room hotel has yet to beflagged and is in early planning stages for 6561Hollywood Blvd. The project is by prolificHollywood development company CIM Group.

Like the Argyle, a number of the other hotelsin development will be conversions or renova-tions of older buildings. Among those are theHollywood & Cahuenga Hotel, a 78-room bou-tique inn planned by SPBB for a convertedbank building at 6381 Hollywood, and MamaShelter, a boutique hotel brand out of Paris thatplans to redevelop the 1920s-era HollywoodWilcox Hotel at 1557 Wilcox Ave. to open itsfirst U.S. hotel. It is to have 68 rooms.

Brandon Feighner, vice president of hos-pitality firm PKF Consulting USA in down-town Los Angeles, is working with Hollywoodhospitality development firm Five Chairs andits partner Hollywood International RegionalCenter to develop a 182-room hotel at 6417Selma Ave. called the Dream Hollywood Hoteland another smaller one just around the corneron Wilcox. He said hotel development inHollywood is coming in response to anincrease in corporate and group travel to thearea, in addition to the usual tourists.

“It’s an area that historically hasn’t had a lotof really good hotel rooms, compared to WestHollywood or other communities on theWestside that have more established hotel mar-kets,” he said. “Now it’s not just a place wherepeople stay because the rates are lower. It’s builtup its own mass and desirability has increased.”

More Buildings.Better Choices.

“Our landlord really helped us.”

“It was Equity Office.”

Hotel Developers CheckInto Blossoming Scene


FINDINGROOM:Futurelocation ofKimpton’sArgyleHotel.

‘We’ll need about3,000 more hotelrooms countywideto be able toaccommodate thedemand that willcome with ourgoal of 50 millionannual visitorsto Los AngelesCounty by 2020.’ERNEST WOODEN JR.,Los Angeles Tourism &Convention Board

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APRIL 21, 2014 LOS ANGELES BUSINESS JOURNAL 33

REC Division ChairRodney Freeman

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THE numbers say Hollywood had a slowfirst quarter, but it would be hard to tell

from a landlord’s or developer’s perspective. The market gave back 14,125 square feet,

pushing its vacancy rate up to six-tenths of apoint to 15. 1 percent in the quarter endedMarch 31 compared with the previous period,according to data from Jones Lang LaSalleInc. But brokers said that the negative absorp-tion is slight, with only a few small givebacksresponsible for the number and the markethasn’t slowed down.

“We’ve been busier than ever,” said NicoleMihalka, a senior vice president at JLL who bro-kers deals in Hollywood. “We are getting interestfrom entertainment companies and bigger pro-duction companies that are looking to consolidateand also tech- and media-type companies.”

Indeed, by all other metrics, the marketappears to be moving up quickly. Landlordshiked up Class A asking rental rates by 14cents to $3.71 in the first quarter – the steep-est price hike in Los Angeles County.

John Tronson, principal at Avison YoungInc., said he’s seeing the highest rates ever inHollywood and it’s not deterring interest at all.

“For several years I would call the marketgood but not great. Now I would have toupgrade the office market to very good,” hesaid. “All we need is one big lease deal of100,000 to 200,000 square feet at one of thedevelopment sites and we could go from verygood to excellent very quickly.”

Among the largest deals done in the mar-ket last quarter was a lease deal by SAEInstitute. The Australian audio engineeringschool signed up for 41,000 square feet at6700 Santa Monica Blvd. and 1017 N. LasPalmas Ave., nearly doubling its requirementwhen the institute decided to move into theformer Eastman Kodak Co. campus, underrenovation by new co-owners LincolnProperty Co. and CEM Realty Capital Inc.

Perhaps most tellingly, developers areunder way on 284,574 square feet of newoffice space in the neighborhood, an indica-tion they are anticipating massive growth inthe area as well.

West L.A. real estate investment trust

Kilroy Realty Corp. purchased a four-acredevelopment site at Sunset Boulevard andVine Street from the Academy of MotionPictures Arts and Sciences for $46 millionin January and plans to spend $285 million tobuild a 475,000-square-foot campus withoffices, apartments and shops.

Kilroy is already under way on a nearby875,000-square-foot Columbia Square mixed-use project.

Miracle Mile developer J.H. Snyder Co.broke ground on a two-building creativeoffice project totaling 245,000 square feet at959 Seward St. in March.

Other developers are under way on a num-ber of massive mixed-use and residential proj-ects that will help Hollywood continue itsrenaissance into a place millennials want to,as they say, “live, work and play.” That’s oneof the most attractive components to compa-nies looking to sign deals in Hollywood.

Brokers said that boded well for the bal-ance of the year.

“It’s hard to predict but if everything con-tinues as it is and it will be better than ever,”Mihalka said.

– Jacquelyn Ryan

Market Gives Back Space ButLandlords Still Hike Up Rents

Triple Play: 6725 Sunset Blvd.

SUNSET BLVD.

BEVERLY BLVD.

HIG

HLA

ND

AV

E.

LA B

REA

AV

E.

1/2 mile

Hollywood

HOLLYWOOD BLVD.

FRANKLIN AVE.

WES

TER

N A

VE.

WIL

TON

PL.G

OW

ER

VIN

E

SANTA MONICA BLVD.

MELROSE AVE.

101

Main Events

INVENTORY . . . . . . . . . .2.27 million square feetUNDER CONSTRUCTION . . . . .284,574 sqare feetCLASS A ASKING RENTS . . . . . . . . . . . . . . .$3.71

HOLLYWOODOFFICE MARKET AT A GLANCE

16151413121110

98

Vacancy Ratepercent

Net Absorption000s of square feet

80

60

40

20

0

-20

-40

’13 ’14’121 2 3 4 1 2 3 4 1

’13 ’14’121 2 3 4 1 2 3 4 1

�Australian audio engineering school SAEInstitute signed a 10-year deal for 41,000square feet at the former Kodak campus at6700 Santa Monica Blvd. and 1017 N. LasPalmas Ave. with landlords Lincoln PropertyCo. and GEM Realty Capital Inc. SAE willmove from its current 20,000-square-footspace at 6565 Sunset Blvd. this year. Termswere not disclosed.�DJ talent agency AM Only nearly tripled itsspace at 6725 Sunset Blvd. The companysigned a lease for 6,675 square feet in Marchwith landlord Crown Realty. The 54-monthdeal was valued at $1.1 million. �Miracle Mile developer J.H. Snyder Co.broke ground in March on 959 Seward St.,

near Romaine Street, where it plans to build atwo-building creative office campus. The proj-ect, totaling 245,000 square feet, is slated forcompletion in 2016.�West L.A. real estate investment trustKilroy Realty Corp. in January acquired afour-acre property on Sunset Boulevard atVine Street for $46 million from the Academyof Motion Pictures Arts and Sciences. Kilroyis planning a 475,000-square-foot mixed-usedevelopment. �Preeminent jazz club Catalina Bar and Grillrenewed its nearly 9,000-square-foot lease at6725 Sunset Blvd. for 15 years with landlordCrown Realty. The deal was valued at about$5.5 million.

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