Commercial real estate leasing along the Wilshire Corridor was little changed over the last quarter, but the consensus among brokers was that it's just the calm before the storm.
Several negotiations under way should translate to leasing activity in the third quarter. Moreover, the spiraling rents on the Westside and the availability of space in the Miracle Mile, Park Mile and Mid-Wilshire sectors are conspiring to make the Wilshire Corridor attractive.
"Over the last few months, the Wilshire corridor has been a little quieter than usual," said Blake Mirkin, a vice president at CB Commercial Real Estate Group. "But we'll see substantial activity in the third quarter. There are a number of tenants in negotiations for that area, probably three to 10 transactions of 50,000 square feet or more about to be finalized."
In the Mid-Wilshire District, the second quarter vacancy rate stood at 26.8 percent, the same as for the first quarter. That's high, but it's a 14.6 percent decline from the 31.4 percent vacancy rate for the like period in 1996.
For the Park Mile and Miracle Mile sectors combined, the second quarter vacancy rate stood at just under 22 percent, down slightly from the first quarter's 23.3 percent rate.
"Wilshire Boulevard east of Beverly Hills, through the Mid-Wilshire district, contains the largest amount of available space of any market except the airport area," said Leonard Nadler, senior managing director at Julian J. Studley Inc.
But the tide is starting to turn. Net absorption for the Mid-Wilshire sector stood at more than 90,000 square feet for the second quarter, up from just under 70,000 square feet in the first quarter, and up from the negative net absorption of almost 140,000 square feet in the second quarter of 1996.
The numbers for the Park Mile/Miracle Mile sector show even more improvement since the first part of the year. That stretch of Wilshire posted net absorption of 80,000 square feet for the quarter just ended, up from a net loss of almost 70,000 feet in the first quarter.
J.H. Snyder Co. has leased about 30,000 square feet at Museum Square, the property at 5757 Wilshire. Snyder broker Cliff Goldstein says the space is close to 85 percent leased and that number will rise any day, he adds, when the company finalizes a deal for about 15,000 square feet with "a well-known entertainment group."
Across the street at Wilshire Courtyard, the structure that spans 5700 to 5750 Wilshire, Snyder has lined up tenants for more than 150,000 square feet in the last two or three months, including an almost done deal for 90,000 feet with the Jewish Federation, a not-for-profit organization.
In addition, Brierly & Partners, an advertising and marketing firm, took 23,000 square feet there, and the record company Capitol/EMI took 45,000. Snyder has also found new space for "a mix of smaller tenants from Beverly Hills," a common occurrence, Goldstein says, "since the mid-80s revitalization of the Miracle Mile."
Howard Sadowsky, executive vice president at Studley, said that "a number of leases at Wilshire Courtyard are turning over in the next few months. There will be a lot of activity in that particular project, a lot of jockeying for position."
Other recent transactions of note in the area include E! Entertainment taking an additional 20,000 square feet in the old CalFed tower, bringing the cable channel's total to close to 115,000 feet in the building that bears its logo.
Goldstein says he "anticipates them basically taking the balance." The tower is now about 99 percent leased, however, so "to get new tenants, we'd have to lose current tenants first."
The Mid-Wilshire sector may also see a significant tenant pull up stakes. The Frank Lanterman Regional Center, a not-for-profit organization, needs about 40,000 square feet, and may not be able to find it in its current home at Central Plaza, the building that spans 3440 to 3470 Wilshire.
In addition, word is Provident Life & Accident will leave 8000 Wilshire for digs downtown, and Healthsource, the Provident subsidiary just purchased by CIGNA, will move from the area to space in Glendale.
But that exodus should be more than balanced by an influx of new tenants. Vincent Pellerito, senior broker with Cushman Realty Corp., says that three major deals "are being consummated." While he won't name names, another entertainment industry union is expected to locate in the Miracle Mile. Two unions the Alliance of Film,Television and Radio Artists and the Screen Actors Guild are already located in the area.
"Other entertainment companies are looking at that area as a serious alternative as the Santa Monica and Beverly Hills markets tighten up," Pellerito said.
Rick Buckley, a vice president with CB Commercial Real Estate Group Inc., notes that "several buildings in the market are well-postured to make deals with big tenants" because a few years ago, when the market was soft all over town, "many Wilshire corridor tenants migrated West," to fancier digs in Century City, Brentwood, Beverly Hills and the Olympic corridor. They signed five-year leases, he adds, which are now coming up for renewal.
"As their leases near expiration," he says, "they're facing higher rates on the Westside. Those rents are rising so quickly that tenants are realizing they're going to have to make some critical decisions."
"You're starting to see a reverse migration back to Wilshire," Buckley said.
- The Travelers Group sold Park Mile Plaza at 4751 Wilshire Blvd. to CMD Realty Advisors.
- E! Entertainment Television took an additional 20,000 square feet in the building bearing its name (the old CalFed tower), making the tower about 99 percent leased.
- Capitol/EMI and ad agency Brierly & Partners both took space in the Wilshire Courtyard, while the not-for-profit Jewish Federation was also negotiating for space in the same building.
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