The Wilshire Corridor may have finally hit bottom in the fourth quarter. Some might say it’s even rebounding.
The area’s vacancy rate was 17.1 percent, lower than last quarter’s by just over 1 point. Perhaps more significantly, the market took back commercial rental space instead of giving it up for the first time in more than two years. Net absorption was about 111,000 square feet in the last quarter, compared with the nearly 120,000 square feet the area surrendered during the third, according to Grubb & Ellis Co.
“I think the trough has passed and we’re seeing more stabilization,” said Jay Martinez, a Sherman Oaks-based principal at Lee & Associates who does business in the commercial district stretching from downtown Los Angeles to Beverly Hills. “The landlords are continuing to give concessions to court tenants in their direction. What’s happening is that they’re finally meeting the market’s demands.”
Indeed, asking rents for Class A properties in the district averaged $2.38 per square foot, a full 13 cents lower than the prior quarter and 20 cents off the $2.58 of a year earlier.
Some of the activity took place in the Miracle Mile, which absorbed nearly 64,000 square feet of office space compared with 55,000 in the third quarter. Even more striking was the activity in Wilshire Center – including Koreatown – where the market absorbed 47,000 square feet after giving up nearly 175,000 the prior quarter.
“Historically, Wilshire has mirrored the cycles,” Martinez said. “Given the good transportation, its proximity to downtown, the cultural richness and the synergy, it’s a bustling corridor that will always bounce back.”
Not everyone, however, is convinced that a recovery has started. James Malone, a senior vice president at Jones Lang LaSalle, acknowledged that the market may have finally found its bottom. But any talk of recovery is premature because of lurking space that tenants have leased but do not occupy.
“I still think there’s a significant amount of shadow space, so as tenants expire they will give back more space,” he said. “Just because there’s positive absorption doesn’t mean that things have turned.”
- North American Real Estate Development Co. Inc. purchased a 15,551-square-foot office building at 113 N. San Vicente Blvd. for $4.3 million. The price represented nearly a 50 percent cut from what it sold for in 2008 before going into foreclosure. The buyer, which was a tenant, will continue to occupy a portion of the building and lease the rest out.
- A 435,039-square-foot office building at 6500 Wilshire Blvd. sold for $174 million to Morgan Stanley and Lincoln Property Co. based in Dallas. The building is almost entirely occupied. Tenants include Dow Jones Co., Cedars-Sinai Medical Center and California Bank & Trust.
- A new service center and sales building for BMW of Beverly Hills are nearing completion. The sales building, comprising 94,000 square feet at 5070 Wilshire Blvd., is set to open Feb. 1. The 240,000-square-foot service center at 5151 Wilshire Blvd. is expected to be completed in July. Construction of the $35 million project began in July of 2008. The BMW dealership is now at 8825 Wilshire Blvd.
- The Scottish Rite Masonic Temple, an 89,768-square-foot structure at 4357 Wilshire Blvd., was listed for $13.5 million. Owned by the Scottish Rite Cathedral Association, the building contains a 2,000-square-foot theater, meeting rooms, offices and a ballroom.
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