Some landmark deals defined the downtown L.A. office submarket last year as it began to swing to recovery.
The vacancy rate dropped fourtenths of a point from the yearago period to 18.7 percent as 107,258 square feet were absorbed in the fourth quarter, according to Jones Lang LaSalle Inc.
Landlords raised the monthly Class A asking rate 13 cents from the year-earlier period to $3.29 a square foot.
“There’s no question activity has picked up,” said Tim Miller, senior vice president at JLL. “We have actually seen a fair amount of tenants expanding. For years, downtown’s downfall was the continuation of downsizing. Now, people are saying they need more space. People are starting to get comfortable and grow their business.”
Among them, private equity firm Oaktree Capital Management signed a sizable lease to expand its headquarters at Wells Fargo Center with landlord Brookfield Office Properties Inc. The 182,000squarefoot deal added a seventh floor to Oaktree’s occupancy in the 54story tower.
In downtown’s largest lease deal of the year, Lewis Brisbois Bisgaard & Smith took 215,000 square feet last month at Overseas Union Enterprises Ltd.’s U.S. Bank Tower at 633 W. Fifth St. The law firm’s previous home, the city of L.A.-owned building at 221 N. Figueroa St., was damaged in a fire that tore through developer Geoffrey Palmer’s Da Vinci apartment project. Financial terms of the shortterm deal were not disclosed but asking rates are about $3.42, according to CoStar Group Inc.
The submarket attracted new businesses as well. Investment firm Colony Capital agreed to relocate from its longtime Santa Monica headquarters when it signed a 10year deal for 54,000 square feet at City National Plaza, 515 S. Flower St.
But perhaps the largest takeaway from downtown last quarter was the area’s investment appeal.
In a submarket record price per square foot, Morgan Stanley & Co. bought the KPMG Center at 550 S. Hope St. from LBA Realty for $407 a square foot, a total of $240 million. The 590,207squarefoot building, which was once part of the defunct MPG Office Trust Inc. portfolio, was 95 percent leased at the time of the deal.
That wasn’t all. Beacon Capital Partners sold the 1.1 million-squarefoot Aon Center at 707 Wilshire Blvd. for $269 million, or $242 a square foot, to Shorenstein Properties. It also sold 600 Wilshire Blvd. for $78 million, or $251 a square foot, to Canada’s Onni Real Estate.
The sales are expected to spur further activity in the neighborhood this coming year.
“After the sale of 550 S. Hope at that valuation, every Class A office landlord is evaluating whether to sell,” said Michael Soto, research manager at Transwestern. To eager buyers, “downtown L.A. still has some challenges but you have trophy Class A skyscrapers and you can plunk down a lot of money at once for the right deal.”
– Jacquelyn Ryan
Lewis Brisbois Bisgaard & Smith leased 215,000 square feet at the U.S. Bank Tower in December after it had to abandon its longtime home at 221 N. Figueroa St., damaged in the Da Vinci fire last month. The short-term deal with landlord Overseas Union Enterprises Ltd. was the largest of the year.
Colony Capital signed a 10-year deal for 54,000 square feet to relocate its headquarters from Santa Monica to City National Plaza, 515 S. Flower St., in October.
Morgan Stanley & Co. bought the 28story KPMG Center at 550 S. Hope St. from Irvine’s LBA Realty for $242 million, or $410 a square foot, believed to be the highest square foot price ever in downtown.
Aon Center, a 1.1 million-squarefoot tower at 707 Wilshire Blvd., sold to Shorenstein Properties for $270 million, or $245 a square foot, in October. Beacon Capital Partners sold the 60 percent-occupied property at a discount to the $330 million it bought the property for in 2007.
Oaktree Capital Management expanded its headquarters at Wells Fargo Center North Tower, 333. S. Grand Ave., with landlord Brookfield Office Properties Inc. The firm, which already occupies six floors in the 54story tower, took a seventh for a total of 182,000 square feet. Terms were not disclosed.
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