One of L.A.'s premiere office properties is becoming a ghost tower.
Arco Plaza, which consists of 515 and 555 S. Flower St., will be 55 percent vacant by early next year because of massive downsizing by its namesake tenant.
And it's possible that the vacancy rate in the two 52-floor towers could go much higher in the next few years thanks to a lack of maintenance on the buildings and the inability of owner Shuwa Investments Corp. to offer competitive terms to tenants.
"Within the two towers there are some very big holes," said Clay Hammerstein, senior managing director at Insignia Commercial Group Inc. "In the 1990s, Shuwa has not been very successful in leasing space in the buildings. Until there is new ownership, I think that will continue to be the case."
Shuwa officials did not return calls for this story.
Hardest hit has been 515 S. Flower, which until recently served as the headquarters of oil giant Atlantic Richfield Co., now in the process of being acquired by BP Amoco.
The building already is 57 percent vacant, according to Cushman Realty Corp., and by early next year, that figure could top 70 percent, brokers say. That compares with an average vacancy rate among downtown class-A office buildings of around 17 percent.
"It's a ghost town," said Cushman analyst Matt Perrigue.
Since the start of the year, Arco has been moving most of its operations out of the building. It already has vacated eight floors, or 200,000 square feet of space. Early next year it will vacate the top two floors.
Arco isn't the only major company to leave. Accounting firm Ernst & Young LLP has vacated 200,000 square feet, and Deloitte & Touche is in the process of leaving 100,000 square feet it had occupied on a temporary basis.
In an indication of just how hard it is to find tenants, the 68,000 square feet vacated after law firm Kindel & Anderson went out of business three years ago remain empty.
The South Tower has fared a little better. Currently, 555 S. Flower is more than 60 percent occupied.
That's largely because its biggest tenant, Bank of America Corp., leases 15 floors, along with a foreign exchange center in the basement and a 50,000-square-foot retail banking branch located between the two towers. All told, the bank leases around 470,000 square feet of space in the building, which is its Southern California headquarters.
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