L.A.'s downtown was a huge beneficiary of the real estate boom. Now, it's taking a big hit during the bust.
The office market gave back nearly 314,000 square feet of space during the third quarter, the most of any county market.
"I think that what we've got is real uncertainty associated with the economy; the confidence is down from the tenant standpoint," said Nathan Pellow, a senior vice president with brokerage Colliers International Inc. who represents downtown tenants. "Most of my clients are looking at holding off a few quarters to make a decision."
That sort of paralysis has slowed deal volume. As a result, the vacancy rate rose a full point to 13.1 percent since midyear, while Class A asking rents were down 1 cent to $3.23 per square foot per month.
A significant portion of the space that has been put back on the market has come from the shuttering of one law firm and the merger of another, according to sources.
Brokers said that there's a perception that more office space could be given back in coming months. Those givebacks could come from companies in the finance and insurance industries that have been walloped by the Wall Street collapse though for now it's more speculation than reality.
A faint silver lining: John McAniff, managing director at Jones Lang LaSalle Inc., said the area has a smaller exposure to the financial service industry than other urban cores across the country.
"It will trickle through, but it is nowhere near San Francisco, Chicago, New York or Boston," he said.
- Hines of Houston purchased the Citigroup Center office building at 444 Flower St. from Broadway Real Estate Partners LLC. The sale price wasn't disclosed but sources pegged the deal at $320 per square foot, or $285 million, for the 891,056-square-foot building. The 48-story tower is 93 percent leased.
- The city of Los Angeles signed a $47 million lease renewal for 170,087 square feet at the Garland Center. The 10-year agreement at the 1200 W. Seventh St. building starts at roughly $2 per square foot per month. The deal was with Charter Holdings Inc., a subsidiary of Wells Fargo & Co. Charter has a master lease with building owner Trumbull & Associates LLP.
- Related Cos. purchased a low-income senior housing community at 740 S. Olive St. from an limited partnership led by real estate investor Robert Maguire. The 12-story building with 309 units sold for $56.5 million. The building, 100 percent leased, was constructed in 1922 and was listed for $53 million.
- Tribune Co., owner of the Los Angeles Times, tapped Cushman & Wakefield Inc. to market the newspaper's headquarters property at First and Spring streets. Times Mirror Square includes several buildings totaling 750,000 square feet.
- UCLA Extension opened its new downtown location at Figueroa Courtyard, a campuslike property with five buildings at 261 S. Figueroa St. Earlier this year UCLA signed a 10-year lease for the 16,380 square feet valued at $5 million. The deal was with landlord California National Bank, subsidiary of Oak Park, Ill.-based bank holding company FBOP Corp.
Office Market At a Glance
Inventory: 32.1 million square feet
Under Construction: 0
Class A Asking Rents: $3.23
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