Vacancy rates continue to drop up and down the Wilshire Corridor as buildings from Koreatown to Miracle Mile fill up with tenants chasing reasonable rents in proximity of the very expensive Westside and increasingly popular downtown.
Overall vacancy rates were 7.3 percent at midyear, down from 8.6 percent a year ago, according to Grubb & Ellis Co. The figure has been below 10 percent for eight consecutive quarters.
Wilshire Center remained extremely tight, with occupancy hovering around 95 percent at midyear. Despite declining vacancy, average asking rates dropped in the second quarter from $1.74 per square foot to $1.71. Still, that's 13 cents higher than a year ago.
"I expect to see more tenants renewing their leases early, and more tenants looking to streets like Beverly and Temple to find owner-user opportunities, rather than paying rent," says Chris Runyen, senior managing director of Charles Dunn & Co. "Tenants want to cap their lease rates for the next several years, and interest rates are still low for buyers."
With several new retail and residential projects worth a total of about $1 billion slated for Koreatown in the next three years, investor interest in the area is expected to grow. However, with two office properties razed to make way for a residential project, the dearth of top-tier office property could keep higher-end tenants out of the market.
Farther west, vacancy in Miracle Mile/Park Mile slid under 10 percent, finishing the first half of the year at 9.9 percent. That helped drive asking rates to $3.09 per square foot from $2.94 in the first quarter. This marks the area's best performance in at least five years.
- Hauser Partners LLC bought the 6,200-square-foot retail center at 5600 San Vicente Blvd. in Miracle Mile for $3.1 million from Goldstone Franklin Development Co. The property has four tenants.
- Jamison Properties picked up the 170,000-square-foot building at 4929 Wilshire Blvd. for approximately $39 million. The seller, Copperfield Investment & Development Co., had owned the building for close to two decades.
- RPM Investments bought the 40,000-square-foot office building at 5150 Wilshire Blvd. for $7.1 million from national architectural and engineering firm Harley Ellis Devereaux, which is rumored to be relocating downtown.
- Business and vocational education provider United Education Institute sublet 30,000 square feet to an unnamed charter school at 3020 Wilshire Blvd. for $7 million over 12 years. The Jamison Properties building is fully occupied.
- A planned three-story shopping center on Western Avenue and Fifth Street in Koreatown is helping spur building sales and redevelopment. The new project will include a 45,000-square-foot California Market, 60 stores and a bank.
Two second-quarter sales occurred nearby, including: The 40,000-square-foot building at 3923 W. Sixth St. sold to an undisclosed buyer for $6 million. The transaction represents a nice return on investment for seller Cypress Equity, which paid just $4.2 million for the property last year. Clayburgh Properties sold the 17,000-square-foot retail property at 512-534 S. Western Ave. to the Han family for $6.5 million.
Office Market at a Glance
Inventory: 13.6 million square feet
Under Construction: 0
Class A Asking Rents: $2.52 per square foot
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