All that buzz you’re hearing about downtown Los Angeles? It’s starting to make a positive difference for the prime office market.
The area absorbed 323,407 square feet of space during the first quarter, retaining most major tenants and attracting several large ones. The vacancy rate dropped a full point to 15 percent compared with the previous quarter.
“What’s going on downtown is awesome,” said Fernando Villa, partner in the real estate division of law firm Pircher Nichols & Meeks. “It has the potential to continue to transition into an entertainment engine for downtown and for the region.”
What’s going on, of course, is talk by downtown-based sports and entertainment company AEG of building a pro football stadium and event center on a current section of the Los Angeles Convention Center. In addition, plans are moving forward on an art museum to be built next to the Walt Disney Concert Hall.
Then there’s the $1.2 billion redevelopment of the Wilshire Grand hotel into 1.5 million square feet of office space, 650 hotel rooms and up to 100 condos – a plan approved by the City Council in March.
There also have been smaller moves, such as Target Corp.’s announcement that it will move into the space vacated by Macy’s at the 7th +Fig complex.
Another driving force behind the market’s good numbers is the relative value of office space. Class A asking rents dropped 3 cents to $3.13 from the previous quarter, and 14 cents from a year earlier. That’s cheaper than Century City and Santa Monica, which compete for top legal and other professional firms.
“Certainly companies are looking at how downtown is priced compared to other submarkets,” said David Rifkind, principal and managing director of L.A.-based real estate investment banking firm George Smith Partners.
Most notable of those tenants are a number of law firms that have been slowly flocking back to the area, with Haight Brown & Bonesteel LLP making news when it announced an intention to relocate to City National Plaza from Marina del Rey’s Howard Hughes Center. (See article page 21.) Architecture firm Gensler also is moving in from the Westside.
Downtown still faces big challenges, such as poor parking and high homelessness rates. But some think the stadium could cement the area as the county’s leading business district.
“Obviously, AEG and the stadium have huge potential to change the downtown story,” Rifkind said. “If that continues to progress, it changes everything.”
- Haight Brown & Bonesteel LLP, based in Marina del Rey, signed a sublease for 27,280 square feet on the 45th floor at City National Plaza from Jones Day. The deal was pegged between $8 million and $10 million for the 10-year term.
- Architecture firm Gensler signed a 12-year lease for 45,000 square feet of space at Thomas Properties Group Inc.’s City National Plaza at 555 S. Flower St. The firm will move from Santa Monica to occupy the top two floors of a three-story building between the complex’s two 52-story towers. Financial terms were not disclosed.
- The $1.2 billion high-rise redevelopment of the Wilshire Grand hotel was approved in March. Developer Thomas Properties Group and hotel owner Korean Air plan to build a 65-story, 1.5 million-square-foot office building, and a 45-story building with 650 hotel rooms and up to 100 condos. Each tower will feature exterior LED lights from top to bottom, and digital signs on the bottom 10 floors.
- Holland & Knight LLP signed a lease to relocate its L.A. offices to 400 S. Hope St., from downtown’s US Bank Tower. The seven-year deal for 41,664 square feet is valued at $10.4 million.
- The Metropolitan Transportation Authority subleased 41,628 square feet from insurance broker Marsh USA at 777 S. Figueroa St. The one-year deal comes with multiple renewal options. The annual price is estimated at $1 million.
- Bank of America Corp. renewed its lease at 333 S. Hope St. The 10-year deal secured the company 180,000 square feet.
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