Call it a sign of the times.
Two huge downtown L.A. office lease deals were signed during the third quarter, totaling more than 425,000 square feet and $150 million in value; both include building-top signage.
But the leases did absolutely nothing to lower downtown’s sky-high vacancy rate of nearly 18 percent or put a dent in the space now on the market. In fact, taken together, they actually added 25,000 square feet of space back to the market, increasing the vacancy rate.
“In downtown, it’s the same story now for several quarters: When tenants sign leases or lease renewals, they take up less space and give back the remaining space,” said Tim Miller, senior vice president in the downtown office of Jones Lang LaSalle Inc.
Overall, according to Jones Lang LaSalle, the vacancy rate rose to 17.8 percent in the third quarter from 17.4 percent in the second quarter and 15.6 percent from the year-ago quarter. Net absorption was once again in the red, with 161,000 more square feet of space put on the market than taken off through leases.
In the largest lease deal of the quarter, Wells Fargo Bank signed a 10-year renewal for its current 291,000 square feet at its namesake tower at 333 S. Grand Ave., which is owned by MPG Office Trust Inc. Local brokers pegged the deal at about $106 million.
Considering the lease involved no give-back of space, the deal counts as a victory of sorts.
The other major deal involved accounting giant PricewaterhouseCoopers, which signed a 15-year lease in late September for 135,000 square feet at 601 S. Figueroa St. Financial terms were not disclosed, but the lease value was estimated to be about $50 million.
However, PricewaterhouseCoopers currently occupies 160,000 square feet in Two California Plaza at 350 S. Grand, so this represents a downsizing for the firm.
Miller said he expects more sizable space give-backs to continue throughout 2013.
Meanwhile, another trend continued to play out: the migration of tenants from atop Bunker Hill to the Financial District at the hill’s southern base. The PricewaterhouseCoopers deal was one such relocation.
In fact, so many companies have made this move that the famed City Club on Bunker Hill is following suit. The club recently closed a lease for 27,000 square feet on the top floor of City National Plaza at 555 S. Flower St.
The club’s been in the Wells Fargo Center since its founding. But David Woodyard, executive vice president at Dallas owner ClubCorp., told the Business Journal last month the new location “is closer to where more of our members are working today.”
Main Events
In the largest downtown office building sale in four years, CBRE Global Investors, an affiliate of CBRE Group Inc., purchased the Mellon Bank Center at 400 S. Hope St. from Tishman Speyer for a reported $238 million, or $339 per square foot. Tishman Speyer had acquired the 26-story, 701,000-square-foot building in 2005 for $245 million.
In the largest office lease in several quarters, Wells Fargo Bank signed a 10-year lease renewal for its current 291,000 square feet at the Wells Fargo Tower, 333 S. Grand Ave. Brokers valued the deal at an estimated $36.33 per square foot per year, for a total value of about $106 million.
PricewaterhouseCoopers signed a 15-year lease in for 135,000 square feet at 601 S. Figueroa St. Financial terms of the deal were not disclosed. The accounting firm will get building-top signage. It had been leasing 160,000 square feet of space in the Two California Plaza building at 350 S. Grand Ave.
Apparel company VF Corp. signed a 10-year lease for 80,000 square feet of warehouse in Alameda Square near Alameda Street and Olympic Boulevard. The deal with owner Evoq Properties was reported to be valued at around $18 million.
The Los Angeles City Council in September approved a series of agreements with Anschutz Entertainment Group to build the Farmers Field football stadium on the site of the current West Hall of the Los Angeles Convention Center; the West Hall would be demolished and replaced with another hall that adjoins the center.
