Activity 'Just Rolling Along' in Absence of Lease Opportunities
By MARGOT CARMICHAEL LESTER
Absent large new office buildings and significant portions of available space in older stock, the Wilshire Corridor market remained a haven for small deals.
And in the October-December quarter, even those were hard to find.
The Wilshire Center and Miracle Mile/Park Mile districts, running along the ribbon of road from downtown to Beverly Hills, saw little activity in the fourth quarter, bringing a quiet close to a fairly static year.
"We didn't see a huge dip or huge growth out there," said Dan Cherrie, a broker with Charles Dunn Co. "It's still just rolling along."
Downtown-adjacent Wilshire Center again fared slightly better than its tonier counterpart to the west. According to Grubb & Ellis Co., overall vacancy in Wilshire Center fell to 12.4 percent in the October-December quarter from 12.2 percent in the previous period. Vacancy was 12.8 percent at the close of 2002.
Class-A asking rates of $1.42 per square foot were flat compared to the $1.41 in the July-September quarter. Year-ago asking rents were $1.37 per foot.
"There were no large lease transactions at all," Cherrie said. "There may have been some done internally by Dr. Lee, but that activity doesn't get into the market."
David Lee, primarily through his Jamison Properties investment vehicle, is the largest single landlord in the submarket, and remained active in the last quarter.
Of the few significant lease deals, Hanmi Bank renewed its lease of 23,870 square feet at 3660 Wilshire Blvd. in a five-year deal, terms of which were not disclosed. Pacific Union Bank leased 6,080 square feet at $1.25 per foot at 3325 Wilshire Blvd. in another five-year deal.
The market still experienced negative net absorption (the amount of space newly occupied relative to the amount newly available), putting back 13,000 square feet in the quarter. That marked an improvement from the negative 37,700 square feet in the third quarter, though it remained well off the 96,000 in positive absorption in the same period last year.
"Mid-Wilshire has been steady for quite some time now because there are no major tenants that plan to make a move out of the market and very few large blocks of space left for a large user to absorb," said Chris Runyen, a vice president at Grubb & Ellis. "We continue to see a trend of smaller tenants moving in and out of the market, leaving small fluctuations from quarter to quarter."
Such activity has little effect on a market with 7.2 million square feet of office space, Runyen noted. "It's just a few new tenants to the market or existing tenants who are growing or relocating to larger space," he said.
The investment market was non-existent, thanks mostly to Lee's domination of the market, said Cherrie.
"The reason we're not hearing much on the investment front is that with one person controlling so much of the area, no other potential investor is going to get into the market," he said.
Lee's Jamison Properties continued to expand in Wilshire Center with the $6.9 million purchase of the 66,000-square-foot office building at 3545 Wilshire Blvd.
Leasing activity wasn't much more vibrant in Miracle Mile/Park Mile, where only three deals were recorded in the final quarter.
As the vacancy rate slipped to 15.7 percent in the fourth quarter from 16.5 percent in the previous period, asking rates rose to $2.10 from $2.05 per square foot. There has been improvement from the year-ago vacancy rate of 18.1 percent, but asking rents then were a far higher $2.21 per foot.
Space in the Miracle/Park mile market continued to come off the market, with net absorption in the last quarter of 2003 at 46,700 square feet, down from the 163,000 in the third quarter but higher than the negative 38,252 in the year-ago period.
Cedars-Sinai Medical Center sublet 51,000 square feet at 6500 Wilshire Blvd. from JP Morgan Chase at $1.63 per square foot for 36 months.
At 5657 Wilshire Blvd., Mercury Publishing Services leased 10,573 square feet for 10 years (the lease rate was not disclosed). Heritage Networks sublet 6,650 square feet at 5750 Wilshire Blvd. for $1.85 per square foot over five years.
"I expect to see leasing velocity picking up as people get more comfortable with the economy," said Bob Safai, president of brokerage firm Madison Partners.
"Miracle Mile/Park Mile has been the low-cost provider compared to the Westside for some time," Safai said.
The area's traditionally lower price tag and bank's low interest rates will make it an attractive option for investors in the near-term.
"They can invest in real estate, own their own building, take depreciation and earn appreciation on the asset," Safai said. "That's hard to beat."
- Hanmi Bank renewed 23,870 square feet at 3660 Wilshire Blvd. for five years at undisclosed terms.
- Pacific Union Bank leased 6,080 square feet at $1.25 per square foot at 3325 Wilshire Blvd. for 5 years.
- Cedars-Sinai Medical Center sublet 51,000 square feet at 6500 Wilshire Blvd. from JP Morgan Chase at $1.63 per square foot for 36 months.
- Mercury Publishing Services leased 10,573 square feet for 10 years at an unreported rate at 5657 Wilshire Blvd.
- Jamison Properties purchased 3545 Wilshire Blvd. for $6.9 million.
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