Miracle Mile usually leads the news out of Wilshire Corridor, which stretches from Beverly Hills to downtown Los Angeles, but it was the less swanky Park Mile and Wilshire Center to the east that made headlines in the third quarter.
“The big story is that Farmers Insurance will be moving their Wilshire offices to Woodland Hills, vacating three buildings that it owns in Park Mile,” said Chris Runyen, senior managing director at Charles Dunn Co. Inc. The decision, driven in part by an extensive retrofitting required at the Wilshire Center properties, enables the insurer to consolidate operations into space it already owns 23 miles to the northwest. “When Farmers sells and vacates, it will leave large blocks of space that will be difficult to fill.”
Vacancy in Park Mile is already high, closing the quarter at 28.9 percent, up from 24.5 percent at midyear, according to data from Jones Lang LaSalle Inc. Brokers attribute the rise to smaller tenants moving out, as no big departures were reported. Asking rates have held steady at $2.30 a square foot since last year.
“Based on the news from Farmers, it would be wise for landlords along Wilshire to secure new tenants and renew their existing tenants before those large blocks of space hit the market in mid-2014,” Runyen said.
Further east, Wilshire Center “continues to be a low-cost alternative market for Los Angeles; it’s home to many back-office users and those looking for pricing discounts,” explained Brian Niehaus, a vice president at Jones Lang LaSalle.
The submarket notched two notable lease deals in the quarter, both with landlord Jamison Services Inc. Lambda Legal Defense and Education Fund inked for 6,100 square feet at 3325 Wilshire Blvd. and Hanmi Bank renewed its headquarters lease for 39,000 square feet at 3660 Wilshire. Neither deals’ terms were disclosed.
Overall, the submarket absorbed 61,000 square feet, helping dip the vacancy rate to 20.3 percent from 21 percent the prior quarter. The submarket was led by the activity in Wilshire Center, where the vacancy fell to 25.6 percent from 27.5 percent the previous quarter. Average asking rates remained at $1.72 for the second consecutive quarter.
And what of Miracle Mile?
“Entertainment and advertising, along with professional services firms, continue to seek out space in Miracle Mile as Hollywood and Beverly Hills continue to tighten,” Niehaus said.
The numbers bear that out.
Vacancy dropped for the third consecutive quarter, falling to 13.5 percent from 13.8 percent the previous quarter.
“The general feeling is that the market is steady,” Runyen said. “There’s increasing demand for lofty, creative space, but nothing available, so we might see more landlords in Miracle Mile catering to that type of tenant.”
The contraction prompted landlords to hike average asking rates to $3.01 in the quarter. That’s 5 cents over midyear and an eye-popping 32 cents above the asking rate a year ago.
Niehaus attributed the rise to landlords responding to vacancy nearing the magic 12 percent mark.
Overall, Wilshire Corridor continued its consistent performance.
– Margot Carmichael Lester
