The Westside office market, usually one of the strongest in Southern California, lost more tenants than it gained during the first quarter of the year, signaling a dramatic slowdown, according to a report released this week by a national real estate firm.
The report, compiled by the Grubb & Ellis Research Service Group of West Los Angeles, said that a surge of new office space entering the market, combined with an unusual jump in the amount of space being vacated by tenants, left the area with a decline--about 30,000 square feet--in the amount of office space occupied.
While the decline was small, it is significant because the area had been absorbing an average of 300,000 to 500,000 square feet of new space per quarter over the last several years.
The vacancy rate for the Westside rose from 13.5% to 15.6% at the end of the first quarter, as about 1 million square feet of new office space entered the market. The slowdown is likely to continue, the Grubb & Ellis report said, because an additional 1.4 million square feet of new space is expected to be completed by the end of the year.
The firm surveyed 296 existing buildings and 18 projects under construction for the report.
Beverly Hills may be hit especially hard by tenant departures. American Medical International has given up 30,000 square feet of space as it begins moving its national headquarters from Beverly Hills to Dallas. AMI may vacate another 50,000 square feet in the next several months, brokers said.
The closing of Drexel Burnham Lambert Inc. and other financial firms, as a result of the collapse of the junk bond market, may vacate as much as 200,000 square feet of space in Beverly Hills by the end of the year, according to brokers.