The two distinct components of the Wilshire Corridor submarket each showed signs of tightening in the third quarter, but some slack remained.
In the Miracle Mile/Park Mile area, lease velocity picked up with a rash of renewals and signings. New housing and retail amenities nearby attracted companies to relocate there.
Asking rates on Class-A space rose to $2.23 in the third quarter from $2.14 in the previous three months and $2.05 in the third quarter of 2003, according to Grubb & Ellis Co.
Still, landlords were willing to cut deals to keep tenants in place and lure new ones, and effective rates varied widely. Net absorption was positive at 1,454 square feet for the third quarter but year-to-date remains at negative 46,177 square feet.
Transactions were a factor in the Miracle Mile/Park Mile market.
Tishman Speyer Properties closed escrow on the 370,000-square-foot building at 6300 Wilshire Blvd. for $75 million, or $202 per square foot, and raised asking rates.
In anticipation of their sale of 5670 Wilshire Blvd., J.H. Snyder Co. and Goldrich & Kest Industries LLC also upped asking rates. The building is expected to move for as much as $110 million.
The busiest building was 6500 Wilshire Blvd. There, two subsidiaries of public relations firm Publicis Groupe SA renewed for 32,000 square feet. The $11-million transaction will keep Manning Selvage & Lee and Mediavest Worldwide for more than 10 years. Cedars-Sinai Medical Center leased 19,932 square feet in a 36-month deal at an effective rate of $2.45 per square foot and sublet 10,609 square feet in a 40-month deal at an effective rate of $1.50 per square foot.
Elsewhere in the market, software developer Mitratech sublet 27,894 square feet from California National Bank at 5900 Wilshire Blvd. The 60-month sublease had an effective rate of $1.35 per square foot. Launchpad Communications sublet 33,000 square feet at 5757 Wilshire Blvd. in a 38-month lease at $1.40 per square foot; and Graham Silberg and Sugarman Inc. renewed at 5055 Wilshire Blvd. for 6,489 square feet. The 48-month lease is priced at $1.85 per square foot.
Despite this activity, Class-A vacancies remained virtually unchanged, dipping to 16.7 percent in the third quarter from 16.8 percent in the second. The rate has hovered in the 16 percent range for over a year.
"There's not that many good-sized blocks of space available in Park Mile," said Rob Waller, first vice president at CB Richard Ellis. "So there really hasn't been that much movement there." That's driven larger tenants to Miracle Mile, where there are more large footprints to be had, he said.
In the Wilshire Center market, stretching eastward from La Brea Avenue to Koreatown, a strong influx of new tenants hasn't yet translated into higher asking rates.
Net absorption totaled 68,967 square feet in the third quarter, up from 46,458 square feet in the April-June period.
"The significant positive absorption is the result of the national economy improving," said Zaya Younan, chairman and chief executive of Younan Properties Inc. "That allows people to expand their operations through hiring, inventory and more space per individual."
Vacancies fell to 10.9 percent after holding at around 12 percent for six consecutive quarters. Yet average asking rates remained steady. Class-A rates ticked up one penny from the second quarter to $1.41 per square foot, equal to the like year-ago period. Class-B asking rates were unchanged sequentially at $1.30, up from $1.27 in the year-ago quarter.
The most significant lease deal involved Westwood College of Technology, in a 10-year, 40,000-square-foot transaction worth $6.1 million at 3250 Wilshire Blvd. The college relocated from 3460 Wilshire Blvd.
Advertising firm McDonald & Associates renewed and expanded it lease at 4221 Wilshire Blvd., taking 10,913 square feet of office space for three years at undisclosed terms.
There were several large owner-user sales, at prices Grubb & Ellis Vice President Chris Runyen said were historic highs.
Class-B buildings at 818 S. Berendo St., 2140 W. Olympic Blvd. and 3330 Wilshire Blvd. traded hands at prices between $1.6 million and $8.7 million. And in the Class-C market, Public Counsel Inc. bought 30,452-square-foot 610 S. Ardmore Ave. from AMFM Broadcasting Inc. for $3.6 million.
One of the highest-priced deals of the quarter was an investment transaction for the Class-C medical building at 639 S. New Hampshire Ave. Haeri LLC bought the 21,088-square-foot property earlier this year for $2.3 million and flipped it in the third quarter to Jin H. Suh for $3.5 million with no improvements. "That's a 50 percent gain in less than a year," Runyen said.
And at 4500 Wilshire Blvd., the Hill Family Trust sold a 13,565-square-foot Class-B building to 4500 Wilshire LLC 13 for $3.9 million.
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