The Wilshire Corridor continued its downward spiral in the second quarter.
Some 200,000 square feet of space was freed up on the market that stretches like a commercial spine along Wilshire Boulevard from downtown Los Angeles to Beverly Hills. That’s twice the negative absorption rate of the first quarter, according to Grubb & Ellis Co. The vacancy rate spiked 1.5 points to 17.4 percent as a result.
The trend was slightly less pronounced in Koreatown, where vacancy rates increased from 15.2 to 16.3 percent, and somewhat more evident in the Miracle Mile district, where they grew by a full 2 points to 18.8 percent.
“It’s not surprising. It’s in line with what’s going on everywhere,” said James Malone, senior vice president of Jones Lang LaSalle in Century City. “In a market where lease rollovers are becoming rarer, you see tenants either downsizing or not renewing and relocating.”
That, in turn, has driven lease rates down; the averaging asking rent for Class A buildings was $2.52 per square foot compared with $2.56 in the first quarter and $3.02 a year ago.
“They’re coming down because landlords are realizing that the rents they wanted six, 10 months ago just aren’t going to happen,” Malone said. “There’s no doubt that landlords must do anything they can to keep tenants in place.”
He cited several landlords on the Miracle Mile who have offered discounted parking rates to keep tenants or, in some cases, lowered their rents before leases expire. Such inducements may also apply to new tenants, many of whom are being offered free-rent periods or building upgrades.
Office Market At a Glance
Inventory: 14.2 million square feet
Under Construction: 0
Class A Asking Rents: $2.52
- Animal Defenders International, an animal rights organization with offices on the West Coast and in London, leased 1,372 square feet at 6100 Wilshire Blvd. The term is 60 months, with three months free and a starting rate of $2.70 per square foot increasing by 3 percent a year. The tenant also can spend up to $25 per square foot to build the space to its own specifications.
- Verifi Inc., an online credit card security company, moved its national headquarters from 8383 Wilshire Blvd. down the street to 5670 Wilshire Blvd. Its new digs, owned by Blackstone Group, comprise 14,636 square feet on the 20th floor. With four months free rent, the term of the lease is 64 months at $2.70 per square foot increasing by 3 percent each year. The new tenant also received reduction in parking fees.
- The former headquarters of Petersen Publishing Co. at 6420 Wilshire Blvd. is open for leasing after a major renovation by its new owners, TA Associates. The 174,453-square-foot building is still about 72 percent vacant, with available space being offered for $1.75-$3.00 per square foot.
- Mojo, a graphics company serving Disney, DreamWorks and other studios, has expanded from Wilshire Courtyard West at 5750 Wilshire Blvd. to Wilshire Courtyard East at 5700. The company retains about 20,000 square feet at its original location, while adding 10,355 square feet in the new building. Details of the lease agreement were not available. Both buildings are owned by RREEF America, a unit of Deutsche Bank’s real estate investment management arm.
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