Tenant-friendly deals have been the norm along the Wilshire Corridor in recent years as landlords attempted to lease up buildings. But it's getting harder to find low rates, free rent and generous tenant improvement allowances as vacancies continue to drop and asking rates rise.
The vacancy rate along the Wilshire Corridor fell to 10.6 percent in the second quarter from 11.7 percent in the previous three months and 14.3 percent for the like period a year earlier, according to Grubb & Ellis Co. Meanwhile, asking rents crept over the $2-a-foot mark, rising 4 cents sequentially $2.02.
The Wilshire Corridor is made up of two submarkets. Close to downtown, vacancies in Wilshire Center continued a steady decline to 9.7 percent from 12.2 percent a year earlier.
In Miracle Mile/Park Mile, there was more noticeable improvement, thanks to tenants seeking refuge from Beverly Hills and the Westside. Vacancies fell to 11.8 percent from 13.7 percent in the first quarter and 16.8 percent one year earlier.
Asking rents in Miracle Mile/Park Mile rose to an average of $2.33 a square foot from $2.27 in the first quarter and $2.14 a year earlier.
"Most of the occupancy is attributable to organic growth of current tenants electing to expand as the rest of West L.A. continues to tighten," said Guy Eisner, a broker with Grubb & Ellis.
A tightening market isn't home free yet, said Mark Robinson, corporate managing director at Studley. He said Spelling Entertainment and several other firms at Wilshire Courtyard have leases for 131,000 contiguous square feet expiring around May 2006 that aren't expected to be renewed. (Spelling is consolidating operations with Paramount Television.)
"That's a nice size hole in a small market and they will be pressed to make a solid pre-vacating deal or deals to keep things stable," Robinson said.
In Wilshire Courtyard, Mojo LLC leased 17,351 square feet at 5750 Wilshire Blvd. in a 7-year deal for undisclosed terms.
There were two transactions at 6310 San Vicente Blvd. Jefferson Trading Co. took 3,149 square feet at a $1.91 rate, and Seven Arts Pictures leased 2,678 square feet at $1.80 a foot.
Rausch Purchasing Management Inc., expanded its lease by 1,692 square feet at 5055 Wilshire Blvd. in a 3-year, $2.05-per-square-foot deal.
Wilshire Center benefited from the squeeze on tenants moving eastward, looking to get their money's worth. Average asking rates in the area are significantly lower than in Park Mile/Miracle Mile. Class-A rates rose to $1.46 per square foot from $1.40 one year earlier, while the significant Class-B market essentially held steady at $1.29 a square foot.
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