Wilshire Corridor opened the year with a steady performance, charting barely perceptible changes in quarterly vacancy and asking rates. But the submarket, which runs from downtown Los Angeles to Beverly Hills, reported marked improvement in year-over-year asking rates even as occupancy declined.
First quarter data from Jones Lang LaSalle Inc. show overall vacancy at 19.9 percent, up from 18.4 percent a year ago and 19.2 percent in the final quarter of 2012. Despite the availability of more space, asking rates rose dramatically – to $2.23 from $2.14 a year ago; the previous quarter was $2.22.
To no one’s surprise, the hike was driven by the Miracle Mile, whose dance card is always full.
“Years ago, people would pretend Miracle Mile was part of the Westside, but now it truly is,” noted Brad Feld, a partner with Madison Partners. “The traffic patterns are much easier, so tenants can get to many different areas of town via many forms of transport. And there’s good value in Miracle Mile.”
Landlords there asked for $2.71 a square foot (up 2 cents from the previous quarter). That price point is appealing to entertainment, media and technology companies seeking centrally located high-quality space that’s comparatively affordable.
“As spaces in the Westside continue to become saturated, the demand for space in the periphery submarkets will rise, particularly lured by lower rents,” explained Connie Hwang, regional research director for Avison Young. Westside asking rates average $3.80 a foot. That dollar difference means something to growth-mode companies burning cash and more established ones wishing to conserve it.
Net absorption for the entire submarket was in the red for a consecutive quarter, with 73,773 square feet coming back on the market.
“Ironically, I don’t think that’s indicative of the overall health of the market,” said Brian Niehaus, a vice president at Jones Lang LaSalle.
The decline was led by Wilshire Center, which put 56,756 square feet back on the market as vacancy increased to 24.4 percent from 23.3 percent the prior quarter.
“There are only two buildings with any significant vacancy; many are at 100 percent occupancy,” said Chris Runyen, senior managing director for Charles Dunn Co. Inc. Particularly busy was 5055 Wilshire Blvd., signing 50,000 square feet of deals.
Overall, the mood is optimistic along this stretch of Wilshire.
“We’re going to get some deals done in the next two quarters,” Niehaus predicted. “Whether we’re going to get positive (absorption), I can’t answer, but we’re going to get damn close.”
– Margot Carmichael Lester
*Media juggernaut Clear Channel Communications/Katz Media vacated its space at 6500 Wilshire Blvd. for 45,500 square feet at 5700 Wilshire in a 10-year, $3.25-a-square-foot deal. Cedars Sinai continued to expand its footprint, absorbing the Clear Channel space.
*E Entertainment Television inked a 10-year deal in the west building at 5700 Wilshire Blvd. for approximately 30,000 square feet at a similar price point.
*5055 Wilshire Blvd. inked three deals for undisclosed terms: The Directors Guild of America, 26,903 square feet; CO Architects, 20,243 square feet; and Broadway Federal Bank, 8,885 square feet. Rents are estimated at $2.25 to $2.50 per square foot.
*National Alliance on Mental Illness inked a five-year, 17,600-square-foot lease at 3250 Wilshire Blvd. at $1.70 per square foot.
*Korda Group bought a parcel at Wilshire Boulevard and Orange Avenue for $6.5 million from Ralph Grunauer. The property’s approved uses include commercial, retail and for-sale or rental residential.
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