Remember the downtown boom? If you can think back that far.
The office market gave back space in the second quarter, marking the second time in the last three quarters that net absorption fell into the red though just barely at 1,103 square feet.
While year-to-date net absorption was still in the positive range at 52,623 feet, that was only about one-third as much as this time last year, according to Grubb & Ellis Co.
“That means to most of us in the market that we are squarely at the doorstep of a very slow leasing cycle reflected by the economy,” said Bill Boyd, an independent commercial real estate consultant who ran Grubb & Ellis’ downtown office until leaving the company earlier this year. “Status quo will be a gain for the market.”
The vacancy rate fell one-tenth of a point to 12.1 percent, but that was only a statistical quirk driven by an office building that was taken off the market for a residential conversion. Otherwise, vacancies would have risen.
While some companies such as architecture firm Harley Ellis Devereaux have moved to downtown this year, a good chunk of the leasing activity is a result of tenants renewing deals or moving to other properties in the area.
The average asking rent for Class A space was $3.24 on a full-service gross basis, up from $3.14 in the first quarter and $2.90 a year ago. But the rent increases didn’t do much to cheer up the real estate community, considering there are 3.9 million square feet of vacant space. And while some downtown boosters expect the L.A. Live development to help draw more tenants into the market that feeling is not universal.
Office Market At a Glance
Inventory: 32.1 million square feet
Under Construction: 0
Class A Asking Rents: $3.24
MAIN EVENTS
– Warnaco Swimwear Group, a division of New York clothing manufacturing giant Warnaco Group Inc., has signed a seven-year lease for 38,000 square feet at Los Angeles Center Studios, 450 Bixel St. The deal at the Class A, 12-story office building starts at $3 per square foot per month.
– Milbank Real Estate Services Inc. signed three lease deals at its Figueroa Tower, a Class A, 24-story office building at 660 S. Figueroa St. The leases were with Tabata Oxford Personnel LLC of San Francisco; Allied North American Insurance Co.; and Royal Business Bank, a newly formed bank for Chinese-American businesses. They start in the range of $2.75-$3 per square foot per month and rates go up by 4 percent annually.
– White-collar criminal defense firm Brown & White LLP signed a 14,822-square-foot lease for more than 12 years at the Bank of America Plaza. The deal, valued at $7.4 million, was an upgrade for the firm, which will move to floor 40 from 5,000 square feet on floor 36. The lease at the 55-story, Class A building at 333 S. Hope St. starts at about $20 per square foot per year, triple net.
– Local 721 of the Service Employees International Union, which represents local public employees, sold its 44,000-square-foot building at 500 S. Virgil Ave. to unnamed investors. The deal for the Class B building, just west of downtown, was valued at $11.6 million, or about $264 per square foot. The union has a one-year lease at the building, with options for two more.
