The Wilshire Corridor is getting pricey. Average asking rates for Class A office space from Miracle Mile to Mid-Wilshire began rising in late 2003 on shrinking vacancy rates and have hit $2.35 per square foot.
Now, with an 8.1 percent vacancy rate for the corridor and some recent big money sale transactions, building owners are escalating rents overnight in some cases.
"Landlords have been aggressively raising rental rates and parking rates to boost revenues that justify record purchase prices for the area," said Chris Runyen, senior managing director for Charles Dunn Co.
In the Miracle Mile and Park Mile area, Ratkovich Co. and Prudential Real Estate, which bought 5900 Wilshire for $102.5 million in 2005, pioneered the price increases. Arden Realty, which picked up 5670 Wilshire Blvd. for $93 million earlier this year, followed suit. "Both bumped rates by at least 25 percent overnight," Runyen noted.
That opened the door for Legacy Partners to raise rates at 6300 Wilshire Blvd. after acquiring it from Tishman Speyer Properties Inc. for $132 million in September. (Tishman paid $75 million for the 21-story, 400,401-square-foot office building in 2004.) Once the building closed escrow, Legacy hiked rates to $2.95 from $2.35, setting a new standard.
As a result, average asking rates for Class A space in Miracle Mile and Park Mile rose to $2.78 per square foot in the third quarter from $2.72 at mid-year and $2.05 three years prior.
"That's almost a Westside rate," said Blake Mirkin, a senior vice president with CB Richard Ellis Group Inc. "Miracle Mile remains a strong spot because it's got a good product type and good amenities. It works for tenants because employees can move in and out of buildings and have a good selection of restaurants and retail."
Even Class B rates cracked the all-important $2 per square foot barrier, closing the quarter at $2.01, with entertainment companies and advertising agencies continuing to keep Miracle Mile and Park Mile active.
"There are a lot of large clients who stay there, like E (Entertainment) and Primedia. They've been there so long that you just don't have a lot of big activity," Mirkin said.
Despite recording no deals of consequence in the quarter, vacancies continued to drop. The rate fell to 10.4 percent in the third from 10.8 percent for the second quarter.
Further east, Jamison Properties raised rents in 40 of its Wilshire Center buildings earlier this year in Koreatown. The two premiere assets, Equitable Plaza, 3435 Wilshire Blvd., and the Metroplex, 3530 Wilshire Blvd., are now leasing for $1.70 per square foot.
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