DOWNTOWN: Landlords Raise Rents as Demand for Space Accelerates

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Despite jitters in the residential lending industry that have spread to the commercial sector, the downtown office market strengthened in the third quarter as investors and tenants alike continued to be attracted to L.A.’s revitalizing core.


With residential condo towers still rising and the opening of the Nokia Theatre the first phase of the massive $2.5 billion L.A. Live project downtown proved resilient. The vacancy rate fell one point to 12.5 percent and asking rents rose a nickel to $2.95 per square foot since the second quarter, according to Grubb & Ellis Co.


Class A average asking rents have now risen for six consecutive quarters. And even Class B landlords were seeing sufficient demand to raise rents another 7 cents to $2.28 per square foot.


Indeed, with no new office buildings coming on line, downtown saw 514,773 square feet of space absorbed, with the amount of direct space available for lease down 19 percent from last year.


“Net absorption and rents continue to move in the right direction for downtown,” said J.C. Casillas, client services manager for Grubb & Ellis. “Class A rents are up 22 percent from the third quarter 2002.”


And good fundamentals like this continue to drive investor interest, particularly in the Central Business District, where six buildings traded hands in the three-month period.


Hines REIT Properties LP cut a deal to buy the 595,000-square-foot, 30-story One Wilshire office tower at 624 S. Grand Ave. for $287 million from Carlyle Group, a Washington D.C.-based private equity firm.



MAIN EVENTS

– California Plaza saw two lease transactions. Hill Farrer & Burrill LLP took 36,623 square feet at One California Plaza, 300 S. Grand Ave. Hughes Hubbard & Reed LLP renewed for 36,473 square feet at Two California Plaza, 350 S. Grand Ave. Terms were undisclosed.


– New Dream Network LLC inked an 8,830-square-foot lease at 707 Wilshire Blvd. for $2.3 million.


– Net2EZ Managed Data Centers took a $24.5-million, 11-year lease for 20,000 square feet at 600 W. Seventh St. for a data center and office.


– Bank of America sublet 83,000 square feet at the Garland Center, 1200 W. Seventh St., from master lease holder Charter Holdings in a $28 million deal. Charter will spend the proceeds on infrastructure improvements.


– Hines REIT Properties LP is under contract to buy the 595,000-square-foot, 30-story One Wilshire office tower, 624 S. Grand Ave., for $287 million from Carlyle Group, a Washington D.C.-based private equity firm. The building was 99 percent leased at time of sale. In late August,


– A local investor purchased the 200,000-square-foot 801 S. Grand Ave. building for $55 million from CIM Group.


– San Francisco’s Bristol Group sold 1055 W. Seventh St. to Jamison Services Inc. for undisclosed terms.


– Private investment group Kids From the Valley XX LLC bought a 13,308-square-foot 1022 S. Hill St. office building from United Pacific Investments Inc. for $3.2 million.



Margot Carmichael Lester

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