"Because of Santa Monica's amenity wealth, it has caused the market of available high quality creative space to decrease as firms vie for a great SaMo location—as is seen in our report, Santa Monica still has the lowest vacancy (and highest rents)," Emmanuel Soriano market and development partner at Industry Partners, tells GlobeSt.com. "Playa Vista is less expensive, while still being close to the ocean and close to the social hot spots of Venice and Santa Monica. Even with Google and Yahoo!’s move, there is still plenty of space to be filled. Playa Vista is the Westside’s heart in that, with moves by Google and Yahoo!, it is already attracting an increased level of interest by firms (big and small) that want to be close to Google and Yahoo!. This co-location of tech firms will continue as existing square footage is occupied and new space comes online. And this co-location will be an incredible concentration of innovation."
Leading trends in the office market, Google signed a 300,000-square-foot lease at the historic Spruce Goose Hangar in Playa Vista, proving the tech and media giants are heading that way. The Industry Partners Westside office report shows that Yahoo! was right behind with a 130,000-square-foot lease at the Collective Campus while IMAX scooped up 66,000 square feet in town. Thanks to these pretty sizeable leases, Playa Vista is indeed becoming the creative hub of the Westside, with year-over-year absorption up more than 70,000 square feet.
The biggest news to make headlines, however, was Google’s announcement that it plans to purchase 12 acres at Wayne Ratkovich's Hercules Campus for $120 million. Although no official announcement has been made, it is expected that Google will build a new Southern California campus that would house up to 6,000 employees. If that happens, it could make Playa Vista the Silicon Valley of Southern California, and therefore, a major magnet for other tech and creative companies. But Google wasn’t alone. Acquisitions in the market surged at the end of the year, with Clarion Partners' acquistion of the 300,000-square-foot Latitdue 34 in the third quarter and Hudson Pacific Properties' and NSB Associates' major purchases totaling more than $50 million in the fourth quarter.
“With the opening of the RUNWAY, Playa Vista will also now have it’s own amenity base, which is something that it has sorely lacked,” says Soriano. “The only issue I foresee really stunting Playa Vista’s future as the creative office heart of the Westside is accessibility. Playa Vista’s only main arteries of access are the 405 Freeway and Lincoln Blvd. The benefits of the Expo Line will not be felt in Playa Vista unless firms in Playa Vista do what their Silicon Valley counterparts have done—shuttle in workers.”
Taking a broader look at the Westside market, the report also shows that absorption rates were up with a total of 742,311 square feet from 527,341 square feet in 2013. This lead to a pretty significant drop in vacancy rates as well, down to 7.2% from 10% in 2013. Rental rates, however, only inched up to $3.68 from $3.58 a year ago.