It was another rough quarter for the downtown submarket, and about one-third of the damage can be chalked up to two shuttered law firms.
Thelen Reid & Priest LLP and Heller Ehrman White & McAuliffe LLP two national law firms that occupied a total of 125,000 square feet of prime real estate at Bank of America Plaza at 333 S. Hope St. disbanded and closed their downtown offices.
That accounted for a sizable chunk of the roughly 336,000 square feet that came back on the market in the region as vacancy rates ticked upward to 13.8 percent, up from 13.1 percent in the third quarter.
Only the sprawling Westside gave back more square footage in fourth quarter 2008. Whitley Collins, senior managing director at the L.A. office of Jones Lang LaSalle Inc., said he expected the rate to climb as more tenants evaluated how they would fare in the new year.
“My sense is that 2009 is when we’re really going to see the shakeout,” Collins said. “Companies are trying to decide if this recession is short term or long term. If it’s short term, they may decide to try to ride it out. If it’s long term, then they’ll probably think, ‘Let’s get rid of the space and be done with it.'”
One anomaly in downtown: Class A asking rents actually increased to $3.28 from $3.23. It was the only office submarket to see a rise in rents in the fourth quarter. But landlords looking for a glimmer of hope shouldn’t get too excited. Collins said the increase was likely due to deals where negotiations began over the summer when rents were higher and only closed in the last quarter.
Office Market At a Glance
Inventory: 32.1 million square feet
Under Construction: 0
Class A Asking Rents: $3.28
MAIN EVENTS
– Thelen Reid & Priest LLP and Heller Ehrman White & McAuliffe LLP two law firms that took up a total of 125,000 square feet of office space at Bank of America Plaza at 333 S. Hope St. shuttered their downtown offices.
– Union Bank, formerly called Union Bank of California, renewed its lease for 345,000 square feet at 445 S. Figueroa St. It was the largest office lease transaction in downtown since 1989. The landlord was Hines of Houston. Terms of the deal were not disclosed.
– The Chubb Group of Insurance Cos. signed a 10-year lease with Thomas Properties Group Inc. for about 80,000 square feet at 555 S. Flower St. The monthly lease rate was $2.92 per square foot. Chubb was previously located at 801 Figueroa St.
– Cogent Communications Inc., a Washington, D.C., technology firm, renewed its 8,408-square-foot lease at 530 W. Sixth St., a 13-story building known as Telecom Center L.A. because of its numerous server farms. The lease is for seven years and is valued at about $3.3 million. The landlord is Telecom Center LA LLC, the entity of a group of unnamed private real estate investors.
– Lee Andrews Group Inc., a consulting company, signed a five-year lease for a new downtown headquarters at 818 W. Seventh St. Lee was previously located at the U.S. Bank Tower. The deal is valued at roughly $450,000 and starts at a monthly rate of $2.58 per square foot. The landlord is Downtown Properties Holdings LLC.
