With space available in premier buildings, affordable asking rates, and a growing inventory of amenities, Westside tenants continued to head east for headquarters space in the second quarter.
Consulting engineering firm Psomas is the latest tenant to land downtown. It's leaving 1144 W. Olympic Blvd. in West L.A. to occupy 35,000 square feet at 555. S. Flower St.
"This hasn't happened in a while," observed Mike Shustak, senior vice president of Grubb & Ellis Co. "Most of the tenants from West L.A. have been opening up satellite offices, not moving their primary address. Increased amenities like LA Live, the MetroRail, condo conversions, and the new Ralphs are pulling tenants to downtown."
Though downtown tenants are beginning to feel the squeeze as landlords raise rents, the $2.90-per-square-foot Class A rate is 29 cents lower than the cheapest Westside market in West L.A., according to Grubb & Ellis Co. Landlords in Class B buildings also are cashing in, raising rents 9 cents to $2.21 per square foot in the second quarter. Two years ago, the rate was $1.96 per square foot.
New tenants and expansions by existing ones pushed vacancy rates down from 14 percent in the opening quarter to 13.5 percent at mid-year. Higher occupancy rates aren't the only factor behind the escalating rates, however. Many of the top buildings traded hands over the past few years, and new landlords need to adjust rates.
"While many downtown landlords have long been eager to reap the benefits of the improving office market, they've had to wait for leases to expire," noted Chris Runyen, senior managing director at Charles Dunn Co.
-Northwestern Mutual's Strategic Financial Group leased 64,000 square feet at City National Plaza, 515 S. Flower St., in a 17-year deal at an undisclosed price. The firm moved from 888 W. Sixth St. as part of the expansion of its office network in Los Angeles.
-Executive suites manager Premier Business Centers, a subsidiary of the Bascom Group, took 21,198 square feet at Wells Fargo Center, 333 S. Grand Ave., in Bunker Hill. Terms were not disclosed. This is the company's second downtown location.
- Beacon Properties sold the 307,556-square-foot 201-221 N. Figueroa St. building and the 471,692-square-foot 1000 Wilshire Blvd. to Broadway Real Estate Partners for $4.8 million.
- Lincoln Properties sold the 915 Wilshire Blvd. building to Brickman, a New York private equity firm, for $117 million, or $304 per square foot.
u The McGregor Co. will build One Santa Fe, a mixed-use project in the Arts District, planned for 2010. It will feature about 440 apartment units and 55,000 square feet of ground-floor retail and live/work space in four, multi-story buildings.
-In other lease deals: Samra University took 28,000 square feet in a 10-year, $5 million deal at 1730 Olympic Blvd. The County of Los Angeles leased 8,000 square feet at 1055 Wilshire Blvd. in a five-year deal at undisclosed terms. Law firm Hill Farrer & Burrill LLP signed a 10-year lease renewal valued at $12 million at One California Plaza, 300 S. Grand Ave.
Office Market at a Glance
33.2 million square feet
Under Construction: 0
Class A Asking Rents: $2.90 per square foot
For reprint and licensing requests for this article, CLICK HERE.
Stories You May Also Be Interested In
- WILSHIRE CORRIDOR: Low Vacancy Rates, Economy Push Rents Higher
- Vacancies Drop, Making Rents More of a Challenge for Tenants
- Handful of Large Deals Keeps Market in Positive Territory
- WESTSIDE: Rents Hit Unprecedented Levels Amid Intense Demand
- Refugees From Tighter Markets Fill in Empty Space Along Strip
- WILSHIRE CORRIDOR: Spinal Market Tapped Out by Recession
- Leasing Slows Amid Concerns Over Inventory and High Rates
- WESTSIDE: High Rents, Low Vacancies Keeping It a Landlord's Market