By LAUREN HOLLINGSWORTH
With a growing number of tenants fleeing tight conditions and rising rents on the Westside, the Miracle Mile's office market is beginning to see more action but none of that activity has yet to reach nearby Mid-Wilshire, where vacancy rates remain among the highest in the county.
The Mid-Wilshire market, which consists of Wilshire Boulevard from Wilton Place to Hoover Street, posted a vacancy rate of 24.3 percent in the July-September period, virtually unchanged from 23.4 percent in the second quarter, according to Grubb & Ellis Co. That makes the area one of the county's least competitive office markets. (Century City, by comparison, has a vacancy rate of just 7.9 percent.)
"In Mid-Wilshire, you can definitely get some great buys if you look at it in a vacuum," said Nick Kanieff, managing director at Kennedy-Wilson Inc. "But do I think that market will ever come back? My gut tells me no."
Kevin Housman, senior director at Charles Dunn Co., was somewhat more optimistic. "Wilshire Center may always be a B market compared to other markets," he said, "but it can only go up,"
Further west, the Park Mile and Miracle Mile district (generally, Wilshire Boulevard from San Vicente Boulevard to Wilton Place) posted a 20 percent vacancy rate in the third quarter, roughly the same as last quarter, according to Grubb & Ellis.
Richard Buckley, first vice president at CB Richard Ellis, said the lack of activity is the result of the typically slower summer months. Another possible explanation for any hesitancy is the volatile state of the economy.
"People are afraid of signing or renewing a lease that's $3 a foot, and having the economy go down the tubes," Buckley said.
But economic uncertainty can work in the area's favor, as cost-conscious companies seek alternatives to pricier areas on the Westside, where rents are reaching up to $4 per square foot.
One example is Equity Marketing Inc., which recently vacated its location at Wilshire Boulevard and Rodeo Drive in favor of 60,000 square feet at 6330 San Vicente Blvd. in the Miracle Mile district. Gruen & Associates also signed a five-year lease for 17,000 square feet in the newly renovated building, as did SK Management, which leased 9,500 square feet.
Lions Gate Entertainment also moved into Miracle Mile, taking 18,000 square feet in the Wilshire Courtyard complex at 5750 Wilshire Blvd. As one of the few class-A office buildings in Miracle Mile, the Wilshire Courtyard has remained a busy property. Spelling Entertainment renewed its lease of more than 100,000 square feet and E! Entertainment Television is said to be moving to the office complex.
On the retail side, Reliable Properties has proposed a $30 million retail development on a long-vacant property on Wilshire near Hauser Boulevard, which would include upscale retail and a six-story parking structure.
Paul Novak, principal with Novak + Associates, an urban planning firm that is assisting the developer, said the project is scheduled to go before the city's planning commission on Oct. 22.
Also in the third quarter, Donald Trump pulled out of a partnership that planned to develop a retail complex at the site of the Ambassador Hotel. The remaining partners, S.D. Malkin Group and Amec Corp., have renamed the partnership Wilshire Center Marketplace. The plan to develop a 1 million-square-foot complex, including retailers, parking, and movie theaters, is going ahead without Trump though it continues to be tied up by the L.A. Unified School District, which is foreclosing on the property.
Also in Mid-Wilshire, Nara Bank relocated from Olympic Boulevard in Koreatown to 18,000 square feet at 3701 Wilshire Blvd. And at Wilshire Financial Tower, at 3600 Wilshire Blvd., Imac Corp. leased 17,800 square feet.
In Hollywood, the City Council has approved an ordinance to create "Phase II" of the Hollywood Entertainment District. The new district will extend from McCadden Place to Gower Street, and from Yucca Street to Selma Avenue.
Still, the office vacancy rate in Hollywood hovered at 18.9 percent in the third quarter, compared with 15.3 percent last quarter, according to Grubb & Ellis. Many tenants are wary of the age of the buildings, which tend to be older than elsewhere in the city, Buckley said.
That, however, hasn't deterred Kennedy-Wilson from making a big investment in the area. It closed escrow on a 160,000-square-foot office building at 7080 Hollywood Blvd. The purchase price is around $19 million, and Kennedy-Wilson plans to invest another $2 million in renovations. In a deal worth $30 million, Kennedy-Wilson also closed escrow on a 300,000-square-foot office building at 6255 Sunset Blvd.
"There are only six class-A buildings (in Hollywood). I now own two of them," said Kanieff. "Hollywood is a market that has a lot of things behind it that point in the right direction. Hollywood should be an address that people want to have."
Meanwhile, Westwood-based CIM Group LLC purchased the 184,000-square-foot office building known as KB Hollywood Center at 6914 Hollywood Blvd. The building is across the street from TrizecHahn Corp.'s highly touted retail-cinema complex, the $385 million TrizecHahn Center, which many hope will lead to a resurgence for the area.
? Equity Marketing Inc. leased 60,000 square feet at 6330 San Vicente Blvd.
? Lions Gate Entertainment leased 18,000 square feet at 5750 Wilshire Blvd.
? Spelling Entertainment renewed its lease of more than 100,000 square feet at 5700 Wilshire Blvd.
? Nara Bank leased 18,000 square feet at 3701 Wilshire Blvd.
? CIM Group LLC purchased a 184,000-square-foot office building at 6914 Hollywood Blvd.
? Kennedy-Wilson Inc. closed escrow on a 160,000-square-foot office building at 7080 Hollywood Blvd. and a 300,000-square-foot office building at 6255 Sunset Blvd.
? TrizecHahn Corp. broke ground on the $385 million TrizecHahn Center in Hollywood.
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