Stretch of Eastern Santa Monica Is Epicenter of New Office Boom

It lacks the skyscrapers, stature and the name recognition of Century City or Westwood. In fact, it even lacks a proper name.

But the eastern stretch of Santa Monica north of Olympic Boulevard has emerged as ground zero in the development of new office space in the Los Angeles area.

Within a block of the intersection of Cloverfield Boulevard and Colorado Avenue, where a giant, yellow construction crane swings over the streets, three office buildings totaling nearly a million square feet of space are under construction. It is one of the few areas on the Westside where zoning is already in place that allows large-scale office development.

The new properties will further the emergence of an existing cluster of low-rise office parks that are already home to such well-known companies as MGM, Sony Music and MTV. Newcomers, however, are often buttoned-down, professional firms, including investment bankers from Westwood and Century City legal firms.

“That area has become the hottest hub of activity in all of the West Los Angeles marketplace,” said Nick Christensen, a broker at CB Richard Ellis.

Interest is running high because there has been so little construction of major office space on the Westside, where vacancy rates have plunged and rents have skyrocketed in desirable locations. In Century City, for example, monthly rents in premier buildings have hit $4 per square foot--about a dollar more than the average rate in eastern Santa Monica.

As a result, tenants seeking large blocks of space on the Westside have little choice but to drive past a swath of auto body shops and industrial buildings to check out the new buildings in eastern Santa Monica, known to some as the Entertainment and Professional Business District or the Special Office District.

“There is consistent demand for space from big corporate tenants coming from more urban areas,” said Tony Morales, head of leasing for Maguire Partners, which owns MGM Plaza, one of the first office developments in the area. “The bigger tenants are finding fewer alternatives.”

What they find when they get there bears more resemblance to suburban Irvine than to sleek Century City. About 2 million square feet of space are spread over a handful of existing campus-style office projects, where buildings--none taller than six floors--are grouped around lushly landscaped plazas and artificial lakes. The vacancy rate stands at less than 10%.

The area “has got everything you are looking for in a master-planned suburban community but it’s not in a remote location,” said Scott Chalmers, leasing agent for Water Garden Phase II.

The first phase of office development in the area took off in the mid-1980s and ended abruptly a few years later when the Southern California real estate market crashed in the early 1990s. The outlook for the office market was so bleak in eastern Santa Monica that one investment group developed a supermarket on part of its property.

But expanding entertainment companies looking for relatively inexpensive office and production space came to the area’s rescue. The movement picked up steam when MGM in 1992 announced plans to relocate its headquarters from Culver City to a 1-million-square-foot office complex completed in 1989. The six-building project at the northeast corner of Colorado and Cloverfield, now known as MGM Plaza, is fully leased, said Morales.

MGM Plaza will soon have new neighbors with the arrival of three additional projects, the first new construction in the area since the real estate market tanked in the early 1990s.

On Colorado Avenue next to Sony Music headquarters, Spieker Properties, a real estate investment trust, is building the Arboretum Courtyard, a 134,000-square-foot project scheduled to be completed this summer.

At the southwest corner of Colorado and Cloverfield, Arboretum Gateway, a project owned by Three Coast Limited Partnership and Apollo Pacifica, will include about 200,000 square feet of space.

Across the street, Water Garden Phase II, a 600,000-square-foot office complex by Los Angeles-based J.H. Snyder & Co. and partner Transactional Financial, is scheduled to open next year and complete the development Snyder began more than a decade ago. The project’s first phase is owned by J.P. Morgan & Co.

Despite the large amount of new space coming up for rent, brokers and owners say there is more than enough demand to fill the new buildings. In fact, Universal Music Group has tentatively agreed to occupy one of the new buildings, the six-story Arboretum Courtyard.

In addition, companies such as Spanish-language television network Telemundo and the local investment banking operations of Prudential Securities have signed leases in existing buildings.

“We are now beginning to see professional firms that . . . don’t need the Century City location,” said Lisa St. John, who heads leasing at Water Garden Phase I, a 665,000-square-foot complex completed in 1992. They “really want an area that is more relaxed.”