Tale of Two Markets: Bustling Interior Outstrips Western End
By MARGOT CARMICHAEL LESTER
The two submarkets making up the Wilshire Corridor inched toward parity in the third quarter, but the mid-Wilshire market closer to downtown remained stronger than the Miracle Mile/Park Mile section further west.
In the mid-Wilshire market, which encompasses Koreatown and is formally known as Wilshire Center, an already tight vacancy environment kept opportunities for major new leasing activity at a minimum.
The third quarter vacancy rate for Wilshire Center rose slightly to 12.2 percent from 11.7 percent in the previous three months. One year ago, the rate was 14.1 percent.
The increase in vacancies belies a more consistent market whose numbers can show variance quarter-to-quarter with the timing of tenant arrivals and departures, said Chris Runyen, vice president of Grubb & Ellis Co.'s office services group.
Added Joe Faulkner, executive managing director for Charles Dunn Co.: "With vacancy rates below 12 percent, there's not much that can happen. It's going to be all smaller deals until somebody big moves out."
Average asking rents climbed somewhat. Class-A space inched up to $1.41 per square foot in the third quarter from $1.39 in the second. Per-foot rates were 9 cents above year-ago levels. A similar rise was tracked in the Class-B market.
Net absorption was negative in the third quarter, meaning that 37,680 more square feet came onto the market during the July-September period than was taken off through tenant or owner occupancy.
That could change in the fourth quarter, when the purchase of the former Getty Tower at 3810 Wilshire Blvd. by Upside Investments Inc. hits the books.
"The building was almost completely vacant, so this is another major transaction, as it will remove 340,000 square feet of vacant office space from the market at one time," Runyen said.
Upside plans to convert the former Getty Oil Co. headquarters building to 260 apartments and 25,000 square feet of ground-floor retail. The total investment for the acquisition and renovation is expected to be about $45 million.
Another deal was the sale of the former Perino's restaurant site at 4101 Wilshire Blvd. by the Frank Family Trust, to Carey & Kutay Development Group LLC for $4 million.
Only a handful of lease deals were signed in Wilshire Center, including the law firm of Hayford & Felchlin's renewal and expansion from 4,545 square feet to 9,000 square feet at 3055 Wilshire Blvd. The five-year deal's lease rate was not disclosed. United Education Institute signed for 29,268 square feet at 3020 Wilshire Blvd. for an unreported sum.
"The market is still sales," Faulkner said. "Until companies start hiring people, leasing will be slow."
The Miracle Mile/Park Mile submarket saw a drop in vacancies to 16.5 percent in the third quarter from 19.3 percent in the second. Average asking rents for Class-A space remained steady for the third quarter in a row, holding at $2.04 per square foot. Signing rates, however, were below $2.00 per square foot, brokers said
At 5757 Wilshire Blvd., SK Management inked a 6-year, 10,000-square-foot deal combining sublease and direct space. Sublease space moved at $1.15 for the first three years, while the direct space moved at $1.85. Elsewhere, Spelling Entertainment renewed its 87,000 square feet for two years at 5700-5750 Wilshire Blvd. Terms were undisclosed.
A significant above-market deal was the 30,000-square-foot lease at the North Market complex of the Farmers Market with an aggregate value of $11 million for Ant Farm, a creative services agency. That helped net absorption total 162,961 square feet. Absorption could tank in the fourth quarter, however, when Artisan Entertainment's 60,000-square-foot give-back at 5670 Wilshire Blvd. hits the books.
"That's not what you want to see happen," said Mark Robinson, corporate managing director for Studley. "You'd like to see some upward pressure on rents. But there are some very limber landlords over there like McCarthy-Cook and J.H. Snyder Co. When they have space to fill, they probably can backfill it in a short period of time."
- Upside Investments Inc. purchased the former Getty Oil Co. headquarters at 3810 Wilshire Blvd., and plans to invest $45 million to convert the building to apartments and ground-floor retail. The deal will take 340,000 square feet of vacant office space off the market.
- Ant Farm inked a 30,000-square-foot, $2.78-per-square-foot transaction at the Grove complex, 110 S. Fairfax Ave.
- SK Management inked a 6-year, 10,000-square-foot deal combining sublease and direct space at 5757 Wilshire Blvd.
- Spelling Entertainment renewed its 87,000-square-foot lease for two years at 5700-5750 Wilshire Blvd.
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