Vacancy rates climbed higher along the Wilshire Corridor during the second quarter as the prolonged slump in the media and advertising sectors took its toll on tenants.
The corridor, which stretches along Wilshire Boulevard from downtown Los Angeles to Beverly Hills, had a vacancy rate of 11.8 percent, up a half-point from the first quarter and nearly four points from a year ago. Some 260,000 square feet of space has been vacated this year, taking its toll on rents, which fell 10 cents in the second quarter to $2.97.
“Companies have weathered the storm, lowered their head counts, and now things aren’t picking up as they expected,” said James Malone, a senior vice president at Jones Lang LaSalle. “The deals have been in the low- to mid-$3-per-square-foot range, but going forward the deals will have $2 and cents.”
Malone cites Variety, the show business publication that moved to new offices at 5900 Wilshire Blvd. in late 2008. Now the company is trying to sublease some of its new space as parent company Reed Elsevier seeks a buyer for the publication.
“It’s a sign of the times, unfortunately,” said Rick Buckley, a principal at Madison Partners. “Print media is tough and advertising is tough. Across the board, transaction volume is off significantly and rents continue to decline.”
Wilshire Center in Koreatown had slightly higher vacancy rates than along the Miracle Mile, despite significantly lower rents. Although media companies don’t figure prominently in Koreatown, the general slowdown in the economy has hurt the area’s numerous small tenants.
One upside of declining rents is the new tenants that have stepped in. For example, small museums and art galleries have moved onto the Miracle Mile to take advantage of proximity to the Los Angeles County Museum of Art. The Architecture and Design Museum took the corner at 6032 Wilshire Blvd. and Phantom Gallery has moved into the bottom floor of the Wilshire Dominguez Building at 5410 Wilshire Blvd.
Office Market At a Glance
Inventory: 14.2 million square feet
Under Construction: 0
Class A Asking Rents: $2.97
MAIN EVENTS
– Condominium development 5550 Wilshire Boulevard has opened 15,000 square feet of first-floor retail. Asking price is $5 to $6 per square foot for the space, which is under construction. Lee Shapiro at Charles Dunn & Co. has signed the first tenant, Chipotle Mexican Grill, with occupancy expected in second quarter 2010.
– PPP Real Estate Advisors/Cambra Realty Joint Venture purchased twin office buildings at 6310 and 6330 San Vicente Blvd. for $44 million. Lexington Commercial Holdings, the investment firm of former billionaire Louis Gonda, sold the package, which includes 206,000 square feet of office space.
– Kennedy Wilson, a Beverly Hills real estate firm, bought the 149 remaining condominiums at the Mercury in Koreatown. The building, at 3810 Wilshire Blvd., was the former headquarters of Getty Oil, and was an adaptive re-use project by Cleveland developer Forest City Enterprises. Financials of the transaction were not disclosed.
– Crew Creative Advertising vacated 63,000 square feet at 5700 Wilshire Blvd. after the company shut down its operations and filed for Chapter 11 on May 26. The company signed a 10-year lease in late 2007 for the space.
– The Screen Actors Guild renewed its lease for 96,000 square feet in the Museum Square building at 5757 Wilshire Blvd. The agreement will run until 2012.
