Last quarter, Miracle Mile scored the highest office property bid in Los Angeles County in the past eight years. But even that impressive endorsement couldn’t keep the greater Wilshire Corridor afloat.
Vacancy in the corridor rose to the highest point since the late 1990s, reaching 18.9 percent in the third quarter, according to Jones Lang LaSalle Inc. That was up more than a half-point over the previous period as the market gave back just over 75,000 square feet.
Most of that space came from the Park Mile neighborhood, which gave back 58,408 square feet, pushing vacancy there up seven-tenths of a point to 32.6 percent. Brian Niehaus, a vice president at Jones Lang LaSalle, said that while the numbers might look bad, it doesn’t necessarily signal a new downturn in the market.
“Almost 60,000 square feet is the equivalent of just six 10,000-square-foot tenants bumping around or just closing the door,” he said. “It’s a classic tweener market. Those tenants are going to go to Miracle Mile or a low-cost alternative in Wilshire Center.”
Indeed, the Miracle Mile continued to improve during the quarter. Its vacancy fell three-tenths of a point to 12.1 percent as it absorbed 17,883 square feet mostly in small deals by media-related tenants.
For example, Ryan Seacrest Productions expanded its lease to 13,328 square feet at J.H. Snyder Co.’s Museum Square building, at 5757 Wilshire Blvd., in August. Financial terms were not disclosed but average rates in that building are about $2.10 a square foot, according to CoStar Group Inc.
Lisa St. John, principal at L.A. Realty Partners in Century City, said significant leasing action earlier this year has made it more difficult for new and larger tenants to find available space in the market now.
“Some buildings have firmed up,” said St. John, who holds the listings for 6100 Wilshire. “Our pricing has gone up because we have so little space available.”
Landlords raised asking rates 4 cents to $2.68 on the Miracle Mile, helping to push rates in the overall corridor up three pennies to $2.21.
Rising rates are likely one reason New York’s Tishman Speyer Properties LP wanted to bid on the Wilshire Courtyard, a nearly fully occupied 1 million-square-foot office building at 5700 Wilshire Blvd. The building counts tenants such as E! Entertainment and the Business Journal.
In what would be the county’s largest office deal in nearly a decade, Tishman offered a steep bid of $423 million, or about $425 a square foot, to landlord RREEF, a real estate investment arm of Deutsche Bank Group. They are now negotiating a contract.
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