It could have been worse for the Wilshire Corridor.
Sure, the vacancy rate rose almost 2 points to 9.6 percent throughout the seven-mile corridor. But then look at the asking rents: They barely budged, dropping only a penny since midyear from one end of the corridor to the other, averaging out at $2.91 per square foot, according to Grubb & Ellis Co.
The reason was simple.
“Few major financial institutions have a presence in the market,” said Darren Eades, vice president at Jones Lang LaSalle. “The major bank concentration is Asian-owned banks, which have yet to feel the immediate impact.” And the big American banks like Washington Mutual are mostly retail branches of fewer than 10,000 square feet.
But with the credit crunch clamping down on nonfinancial businesses at the close of the third quarter, the Wilshire Corridor won’t remain immune for long.
“Under the current economic conditions there is a slack demand for office space,” said J.C. Casillas, associate vice president and client services manager for Grubb & Ellis. “A look at the whole (county) picture which includes an increase of 160 basis points in the vacancy rate over last quarter and 190 basis points from a year ago foreshadows what is come.”
The few deals that did close were with tenants facing lease expirations.
“Many are looking at shorter-term lease extensions in lieu of a longer-term commitment,” Eades said.
The vacancy rate in Wilshire Center was 9.4 percent in the third quarter, its poorest performance since the close of 2004. In Park Mile-Miracle Mile, vacancies hit 9.8 percent, a rate not seen since the end of 2006.
Most of the increase came from smaller tenants consolidating or relocating. The largest drop in occupancy was recorded at the 257,752-square-foot Harbor Building at 4201 Wilshire Blvd., where 28,373 square feet were reported vacant.
MAIN EVENT
– San Antonio-based USAA Real Estate Co. completed its sale of the 170,000-square-foot office building at 5055 Wilshire Blvd. to New York-based Somerset Group, an investment, development and management company. Terms were not reported, but the deal is estimated to be valued at more than $45 million. The Miracle Mile building was 97 percent occupied at time of sale. Somerset, one of several buyers interested in the building, has more than 2 million square feet of commercial, retail and residential under ownership nationwide.
– Sue Choi, an agent with Re/Max 100, acquired the 21,408-square-foot medical office building at 3511 W. Olympic Blvd. in Koreatown for $6.5 million, or about $304 per square foot, in a sale-and-lease-back deal with Dr. James Jung. The property includes an adjacent parcel used as a parking lot.
– The city of Los Angeles renewed its 35,000-square-foot lease at Museum Square at 5757 Wilshire Blvd. for unreported terms. Twentieth Century Fox inked a short-term renewal at Wilshire Courtyard, 5700 and 5750 Wilshire Blvd., for 20,738 square feet at undisclosed terms. Fox occupies several thousand square feet of space in both towers, including offices and a production facility.
– The historic Wilshire Christian Church is working with Burbank-based BTG Advisors to investigate potential development of a mid- to high-rise mixed-use project including assisted-living or senior housing, as well as new church facilities at its 634 S. Normandie Ave. location.
Office Market At a Glance
Inventory: 14.1 million square feet
Under Construction: 0
Class A Asking Rents: $2.91
