The worst may be over for the downtown L.A. office market.

Leasing activity in the fourth quarter almost entirely offset the amount of space coming on the market, the first time that’s happened in a year. The market posted a negative absorption rate of a mere 7,000 square feet in the quarter, according to Grubb & Ellis Co. – its best showing in an otherwise dismal year in which nearly 600,000 more square feet came on the market than was removed through leases.

“The bad bleeding is over and the market has stabilized – at least for the present,” said Whitley Collins, a regional managing director with Jones Lang LaSalle.

But it’s still a tenants’ market as law and other professional service firms on Bunker Hill continue to downsize as they renew leases.

“The recession cut so deep that companies are making long-term cost cuts and real estate is the second highest cost behind labor,” Collins said.

Some companies have renewed leases for 30 percent less space, according to Chris Runyen, senior managing director with downtown L.A.-based Charles Dunn Co.

As a result, asking rents for Class A office space ticked down three cents since the third quarter to $3.16 per square foot as the vacancy rate stabilized at 16 percent.

Among the companies that renewed leases in the fourth quarter: Dewey & LeBoeuf LLP, which signed a 26,000-square-foot renewal at the KPMG Tower at 355 S. Grand Ave. in the Wells Fargo Center.

Some of the biggest lease deals in the quarter occurred just outside the core downtown market, immediately west of the Harbor (110) Freeway. L.A. Care Health Plan signed a 12-year, 124,000-square-foot deal at 1055 W. Seventh St., the former Arco tower now operated by Jamison Services.

Nearby, Service Employees International Union Local 721 leased 70,000 square feet of space at 1545 Wilshire Blvd., another Jamison property. SEIU has an option to buy the building, Runyen said.

Because the building was 80 percent occupied, about a dozen tenants will be forced out of the building to accommodate the union. Those tenants will be looking for replacement space in the downtown or Mid-Wilshire markets, he said.


  • One retail lease announcement made headlines during the quarter: Target Corp. signed a lease for 104,000 square feet at the 7 + Fig shopping center at Ernst & Young Plaza. The deal is also the first phase of a major makeover for the 25-year-old, 333,000-square-foot mall. The Target store is taking space vacated by Macy’s in 2009 and is expected to open next year. The store will be smaller than most in the chain.
  • Essex Santee Court LLP purchased a 200,000-square-foot multifamily building at 700-722 S. Los Angeles St. from SWA Acquisitions Ltd. for $31 million, a price of $155 per square foot.
  • L.A. Care Health Plan, a providerof low-cost insurance plans, signed a 12-year, 124,000-square foot lease at 1055 W. Seventh St., the former Arco Tower now operated by Jamison Services Inc.
  • Law firm Nossaman LLP signed a 10-year sublease to take 44,000 square feet at 777 S. Figueroa St., known as the 777 Tower.
  • Law firm Dewey & LeBoeuf LLP signed a 26,000-square-foot lease renewal at the KPMG Tower at 355 S. Grand Ave. in the Wells Fargo Center.
  • Law firm Hurrell Cantrall LLP signed a 17,000-square-foot lease at 700 S. Flower St., operated by Jamison Services Inc.

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