Real estate analysts have cautioned for years that recovery of the downtown office market may take some time.
They were right. Progress has been excruciatingly slow.
Downtown’s office vacancy rate improved by a mere one-tenth of one percent in the second quarter, settling in at 18.5 percent, as tenants absorbed a mere 17,856 square feet of additional office space, according to Grubb & Ellis Co.
But the slow progress has not dampened the enthusiasm of downtown brokers, who continue trumpeting the light at the end of the proverbial tunnel.
Their latest reasoning is that a new sports arena to be built near the Los Angeles Convention Center will provide the surge needed to kick downtown into a higher gear.
“We’re not going to see giant percentage jumps in downtown like other parts of Los Angeles,” conceded Ray Lepone, senior vice president with Grubb & Ellis. “It’s not going to happen quickly but the arena might change that.”
The $250 million sports arena which will host the Lakers and Kings is scheduled to open before the year 2000. The City Council endorsed the project in January and environmental reports have also received tentative approval.
Meanwhile, downtown has continued to show slight growth during the past few quarters, with the vacancy rate about 2 percent lower than a year ago.
The weighted average annual rental rate for Class A buildings increased from $19.68 per square foot to $19.80 per square foot in the second quarter, according to Cushman & Wakefield Inc.
“The actual numbers have not increased that much, and have stayed relatively flat,” said Hayden Eaves, senior broker at Cushman & Wakefield. “But the numbers don’t show that there are some major movements.”
Among them is Citicorp’s upcoming relocation out of Citicorp Plaza and into 444 South Flower St., which is expected to occur this fall sometime before December.
Meanwhile, several other tenants are looking for downtown space.
Deloitte & Touche has hired a broker to look for 150,000 square feet in downtown. KPMG Peat Marwick, Arthur Andersen, Johnson & Higgins and Dean Witter are all looking for new space in downtown, as well.
The Los Angeles County Metropolitan Transportation Authority has signed a new lease at 818 W. Seventh St., jumping its square footage at the building from about 30,000 to 68,000 square feet.
The MTA already occupies a highrise in downtown, but kept the offices on Seventh Street to house portions of its accounting department. Transit officials decided to expand space at the building when the department grew in size instead of splitting it up between the two sites.
Meanwhile, Chase Manhattan Bank is expected to soon close a deal to lease 60,000 square feet at One Cal Plaza, said Eaves.
In response to the area’s growing number of small import-export businesses, Lowe Enterprises Inc. has broken ground on a 20-acre industrial park on the southeastern fringe of downtown at the corner of Alameda and Bay streets.
Dubbed the Alameda Trade Center, the project is expected to be one of many industrial parks to be developed in downtown, where the Alameda Corridor is to terminate. The Alameda Corridor is a proposed 22-mile rail and truck route designed to speed cargo from the ports of L.A. and Long Beach to railyards and distribution centers near downtown.
Plans to build a new sports arena have already sparked some hustling by area developers. TrizecHahn Corp. of Canada bought the Seventh Market Place out of bankruptcy in May.
The center located a few blocks from the arena project site is being repositioned as a mixed-use project with entertainment, nightlife and upscale dining.
The mall, built in 1982, formerly housed Bullocks and other shops. “The focus is to make it more of an entertainment-themed mall, as opposed to just a normal dry-goods mall,” said Marc Tarzcynski, a retail specialist with CB Commercial Real Estate Group. “Downtown is going to be changing, and at a more dramatic rate.”
Major events:
– Citicorp decided to relocate out of Citicorp Plaza and into 444 South Flower St. sometime this fall.
– Lowe Enterprises Inc. broke ground on a 20-acre industrial park on the northeast corner of Alameda and Bay streets.
– TrizecHahn Corp. of Canada bought the Seventh Market Place out of bankruptcy and is redeveloping it into a mixed-use project with entertainment, nightlife and upscale dining.
