With the local office market barely coming out of its long slump, the Wilshire Corridor can be characterized by three words: concessions, concessions, concessions.
The word sends shivers down the spine of landlords, but brokers said that breaks on parking, more tenant improvements and months of free rent are required before tenants are willing to sign lease agreements.
“The deals out there have been primarily heavy concession packages,” said Steven Kolsky, managing principal with Newmark Knight Frank, who noted that some landlords are even offering free after-hours air conditioning.
The concessions are making a difference on the west end of the corridor in Miracle Mile and Park Mile, where 45,827 square feet were taken off the market and the vacancy rate fell nearly a point to 16.1 percent, according to Grubb & Ellis Co.
What’s interesting of late, Kolsky said, is that tenants in the area haven’t moved up to Beverly Hills.
“In soft markets, tenants go to Beverly Hills because they can afford it,” he said. “Now, they’re staying put and reducing operating costs. We’re not seeing as many move from cheaper to more expensive.”
The deals have allowed landlords to raise Miracle Mile asking rents 13 cents to $2.59 per square foot, though that’s still more than a dollar cheaper than Beverly Hills.
Meanwhile, the east end of the corridor at Wilshire Center, which includes Koreatown, was far weaker. Rents have held steady at $1.99 per square foot, but landlords may have to start cutting. The district, which has a tenant base that is a mix of large financial companies and many smaller firms, gave back 45,040 square feet and the vacancy rate rose more than a half-point to 17.9 percent. It was disappointing after Wilshire Center absorbed space during the fourth quarter.
James Malone, senior vice president with Jones Lang LaSalle, said that a full-fledged commercial real estate turnaround will have to wait until the economic recovery strengthens.
“I think companies are starting to spend capital and profits are up,” said Malone. “Hopefully, they will start hiring at some point. We’re still six to 10 months away from significant hiring in these markets.”
- Entertainment trade publication Hollywood Reporter signed a lease for 27,000 square feet at Wilshire Courtyard, 5700 Wilshire Blvd. The publication, owned by Prometheus Global Media of New York, is leaving 5055 Wilshire. The 10-year deal is valued at $12.5 million. Wilshire Courtyard was the home of rival publication Variety until 2008.
- The Knot, a web company that helps brides and grooms plan weddings, leased 5,000 square feet for five years at Museum Square, 5757 Wilshire Blvd. The landlord is J.H. Snyder Co. Financial terms were not disclosed.
- Stun Creative, an advertising agency and production company, also leased at Museum Square. Its seven-year deal is for 12,000 square feet. Financial terms were not disclosed.
- Bug Music leased 23,000 square feet at 6100 Wilshire. The six-year deal with landlord Kennedy-Wilson Holdings Inc. is valued at $4 million. With the move, the pop music publisher nearly doubles its space.
- Morgan Stanley closed it purchase of 6500 Wilshire Blvd. for $174 million, or $418 a square foot. The 435,000-square-foot building is more than 90 percent occupied, with Cedars-Sinai Medical Center its main tenant.
- BMW of Beverly Hills completed and opened its dealership building at 5070 Wilshire Blvd. The $35 million project gives BMW 240,000 square feet for sales and service after relocating from Beverly Hills.
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