After two down quarters, the downtown L.A. office market stabilized during the fourth quarter as fewer firms downsized and the volume of lease deals dropped.
Net absorption was a mere 3,000 square feet during the quarter, according to figures from Jones Lang LaSalle Inc., essentially flat for a market with nearly 30 million square feet of inventory. With just as much space absorbed as space put on the market, the vacancy rate remained unchanged at 17.8 percent.
“Whether it was uncertainty over the ‘fiscal cliff’ or other factors, the fourth quarter saw a slowdown in deals, and that meant fewer firms giving back space on lease renewals,” said Tony Morales, managing director in the downtown office of Jones Lang LaSalle.
Morales said another likely factor behind the deal slowdown was the prolonged recapitalization process at MPG Office Trust Inc., the biggest landlord of Class A office space in downtown.
Meanwhile, there’s been a steady trickle of new tenants coming into the market. Most notably during the fourth quarter was Chinatrust Bank, which signed a lease to move its U.S. headquarters from Torrance to 44,000 square feet on two floors at 801 S. Figueroa St., owned by Mani Bros. Real Estate Group.
While leasing activity slowed in the financial district, the market for creative Class B or C space in the Arts District on the east side of downtown has really picked up steam as technology and design companies have been scouring the area, seeking relief from high Westside rents.
Meanwhile, the biggest building sale was the 845 S. Figueroa St. office tower. The State Bar of California purchased the 140,000-square-foot building for $50 million. The San Francisco-based State Bar bought the property for its local office from downtown’s L&R Group of Cos., which acquired it in 2004 for $18 million as a parking garage. The price, $331 a square foot, was the second highest sale price in downtown in 2012.
Another major sale was the purchase of the University Gateway student housing project near USC. The State of Wisconsin Investment Board purchased the project for $204 million from developers Urban Partners LLC and Blackstone Real Estate Advisors LP.
Looking ahead to 2013, some major space give-backs are expected as part of lease renewals. But this trend is expected to decline through the year as the number of renewals of leases signed at the top of the market six or seven years ago continues to drop.
– Howard Fine
The State Bar of California purchased the 140,000-square-foot building at 845 S. Figueroa St. for $50 million from L&R Group of Cos. The price, $331 a square foot, was the second highest sale price in downtown in 2012. To finance the purchase, the organization sold a 2.7-acre parking lot for $29 million to Beverly Hills developer Sonny Astani.
Chinatrust Bank signed a lease to move its U.S. headquarters from Torrance to 44,000 square feet on two floors at 801 S. Figueroa St., owned by Mani Bros. Real Estate Group. Terms of the lease were not disclosed, but data provider CoStar said the length of the lease is 10 years and the Los Angeles Times valued the lease at nearly $20 million.
The U.S. General Services Administration last month awarded a $318 million contract for a new 550,000-square-foot federal courthouse building at the southwest corner of Broadway and First Street. The contract went to the team of architecture firm Skidmore Owings & Merrill and Clark Construction Group. The GSA said construction is expected to begin sometime this year, with completion set for 2016. The courthouse will contain 24 courtrooms and 32 judicial chambers, along with space for the U.S. Marshals Service, a U.S. Attorney’s Office and the Office of the Federal Public Defender.
In the largest single student housing sale on record in Los Angeles County, the State of Wisconsin Investment Board purchased the University Gateway near USC for $204 million, or $328 per square foot, according to CoStar. The property was sold by developers Urban Partners LLC and Blackstone Real Estate Advisors LP. The 421-unit building is at 601-625 W. Jefferson Blvd. near Figueroa Street.
Apparel company Nasty Gal signed a lease renewal for 46,000 square feet in the Pacific Mutual building at 623 W. Sixth Street. Terms of the deal with landlord Rising Realty Partners were not disclosed.
Developer Izek Shomof purchased the 1915 Corporation Building at 724 S. Spring St. for a reported $10 million.
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