On the surface, downtown Los Angeles seemed relatively placid in the first quarter. Vacancy rates ticked up just one-tenth of a point to 13.9 percent and only about 56,000 square feet came back on to the market, the latter figure better than all but one other area of the county.
But the seeming calm masked a flurry of activity as tenants renewed leases at favorable rates while the market remained depressed with worried landlords more than willing to accommodate them.
“(Tenants are) looking for longer-term deals because they know in three years the economy could be back up, and it’ll be a much tougher market for tenants,” said Lisa St. John, principal with L.A. brokerage Madison Partners. “They were not ready to pull the trigger on deals, and I think more people now are ready to do that.”
Most tenants with leases that expire this year or next and want to stay have already renewed, meaning much of the action is happening with leases that are up in 2011, 2012 and even 2013.
Class A asking rents fell seven cents to $3.36, but landlords are increasingly prepared to go below advertised rates if it means they can secure a deal for five or 10 years, said Whitley Collins, senior managing director at Jones Lang LaSalle.
Usually landlords don’t advertise lower rates; instead, they quietly spread the word that they’re willing to make concessions to get a deal done. Terms were not released on many of last quarter’s lease deals.
“Asking rates almost don’t matter now,” Collins said.
Office Market At a Glance
Inventory: 32.1 million square feet
Under Construction: 0
Class A Asking Rents: $3.36
MAIN EVENTS
– Seyfarth Shaw LLP, an international law firm, signed a 10-year lease for 52,000 square feet at 333 S. Hope St. The space was formerly occupied by Heller Ehrman White & McAuliffe; LLP, a San Francisco-based firm that dissolved in September. Heller Ehrman and another national law firm that closed down last quarter, Thelen Reid & Priest LLP, occupied a total of 125,000 square feet of prime real estate at 333 S. Hope.
– Kirkland & Ellis LLP signed a 10-year deal for 101,000 square feet at 333 S. Hope St. An international commercial law firm, Kirkland & Ellis is relocating from its previous downtown office at 777 S. Figueroa St.
– RSM McGladrey signed a 27,230-square-foot, 10-year lease at 515 S. Flower St. A subsidiary of H & R; Block Inc., RSM is a nationwide business consulting and accounting firm.
– Wilmer Cutler Pickering Hale & Dorr LLP, an international law firm, renewed its 14,420-square-foot lease at 350 S. Grand Ave. The renewal is for five years.
– Urban Education Partnership renewed its 10,960-square-foot lease at 1055 W. Seventh St. for five more years. Urban Education is an L.A.-based organization that advocates for education nationwide. Terms were estimated at $1.94 per square foot.
