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Staff Reporter

The ongoing banking industry consolidation will continue to hamper the nascent recovery of L.A.'s commercial real estate market, according to real estate professionals who serve the banking industry.

But future mergers aren't likely to have as negative an impact on local real estate markets as the big combinations that have already taken place.

While there's bound to be some fallout from future acquisition activity and there will undoubtedly be more mergers, banking experts predict their impact in L.A. won't be as severe primarily for two reasons.

First, L.A.'s two former commercial banking giants Security Pacific Bank and First Interstate Bank have already been swallowed up. There simply aren't any banks left in L.A. that occupy anywhere near as much commercial space as those two institutions once did.

Second, recovery is under way within most of L.A.'s primary commercial real estate markets although downtown is still struggling with soft demand for highrise office space.

Hence, a big merger affecting a major L.A.-area institution would not be as likely to involve a huge exodus, such as the one that came with the BofA/Security Pacific merger in particular.

Even downtown, "the fact that most of the major consolidations have taken place means there simply aren't as many bodies in the banking business," said R. Todd Doney, a vice president with Cushman Realty Corp.

Relative to the BofA/Security Pacific and Wells/First Interstate mergers that hit L.A. during the last five years, other combinations would be "minor blips on the radar screen," Doney said.

Beyond downtown, some of L.A.'s suburban office markets are feeling the effects of big thrift mergers and will likely continue to feel them depending on which institutions end up in the months ahead.

L.A.'s Miracle Mile district recently saw First Nationwide Bank put more than 100,000 square feet of former California Federal Bank headquarters offices up for sublease after First Nationwide bought Cal Fed.

And Great Western Bank's approximately 900,000-square-foot headquarters campus is certain to be at least partially emptied whether Seattle-based Washington Mutual Inc., Irwindale-based H.F. Ahmanson & Co. or some other institution ends up owning Chatsworth-based Great Western.

But the suburban markets aren't likely to get hit anywhere near as hard as downtown got hit by the commercial bank mega-mergers.

The BofA/Security Pacific dumped more than 600,000 square feet of office space on the downtown market much of it prime Bunker Hill highrise space. Much of the space hit the market at the depth of a severe recession.

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