This time last year, the only thing downtown brokers wanted to talk about was the Staples Center and how it was the great hope to revive the region. Now that it's open, there's some scattered activity around it, but the real downtown story is about something entirely different: bandwidth.

Downtown's got commercial space of all classes and lots of wiring, making it fertile ground for telecommunications and Internet companies. And they grabbed a lot of prime space in the first quarter.

Two recent deals illustrate the point: Qwest Communications signed a 15-year deal for 68,000 square feet in the old Robinson's building at 600 W. Seventh St. for undisclosed terms, and Adelphia took 32,000 square feet for undisclosed terms in the AT & T; Center at 611 W. Sixth St., a building that is now fully leased by telecommunications firms.

Brokers also mentioned one key dot-com deal signed downtown during the first quarter. EStyle expanded to another half-floor at 865 S. Figueroa St. The company moved into 5,000 square feet eight months ago and now occupies 20,000. Terms were not disclosed.

These deals weren't enough to make up for downtown's ongoing problems, however, as tenants head elsewhere and vacant sublease space floods onto the market. The first-quarter vacancy rate, at 19.9 percent, is essentially unchanged from 20.0 percent in the fourth quarter of 1999, according to Grubb & Ellis Co. But class-A vacancies increased to 16.0 percent, from 15.4 percent at the end of last year.

The average monthly asking lease rate remained flat at $2.20 per square foot in the first quarter, vs. $2.19 in the fourth quarter. Net absorption, meaning the amount of space leased minus the amount vacated, came to 69,847 square feet during the first quarter. And telecom tenants drove much of that absorption.

"Downtown building owners welcome these (telecom) deals," said Chris Runyan of Grubb & Ellis. "These companies lease up a lot of space and don't need much parking it's a perfect fit. (Office buildings) without parking could be the savior for downtown."

Internet companies don't require the huge footprints of telecommunications firms, but they are also snapping up class B and C space, notes Steve Bay of Insignia/ESG. "It's not the Oklahoma land rush, but there's a lot of interest as more of these companies move east of the Westside," he said.

Prev

For reprint and licensing requests for this article, CLICK HERE.