Strength of East Side Lifting Struggling Leasing Market
By MARGOT CARMICHAEL LESTER
The Wilshire Corridor, sandwiched between the Westside and downtown, experienced a mixed second quarter, as the eastern end more than held its own while the Park Mile/Miracle Mile sector continued to suffer.
Vacancies in the Park Mile/Miracle Mile stretch reached 16.4 percent in the second quarter from 14.4 percent during the first three months and 14 percent for the like period a year ago, according to Grubb & Ellis Co.
Still, said Chris Runyen, a vice president at Grubb & Ellis, the stretch of Wilshire Boulevard closer to downtown is “one of the few markets that’s doing well. It’s looking like the hero.”
The vacancy rate in Wilshire Center was trimmed to 12.7 percent, among the lowest in L.A. County, from 13.4 percent in the first quarter and 16.2 percent in the like year-earlier period.
The tightening might well have been spurred by the relative buy it represents. With asking rents averaging $1.34 per foot, the Wilshire Center submarket is one of only a handful below $2.
The health of the submarket did spur a slight rise in average asking rents to $1.34 from the $1.30 per square foot reported last quarter. In the second quarter last year, average rents were $1.42 per square foot.
Further west the situation was not as good, as the average asking rate for Class-A space in Miracle Mile/Park Mile dipped to $2.22 per square foot from $2.24 per foot in the first quarter and $2.49 for the like period a year ago.
The largest Wilshire Center deal in the quarter was a renewal: The L.A. County Department of Health Services leased five floors totaling 60,000 square feet for 10 years at around $1.30 per square foot, or $10 million, at the Metroplex Wilshire building at 3530 Wilshire Blvd.
The building also scored Asiana Airlines as a tenant after it relocating to the 17th floor, taking 14,000 square feet for 10 years at $1.45 per square foot.
At 501 S. Virgil Ave., Beyond Shelter, a non-profit homeless service agency, leased 48,000 square feet for about $1.25 per foot. The agency will provide community meeting space and sublease space to other non-profit agencies.
Ticketmaster relocated its Citysearch division closer to the company’s Wilshire Center headquarters, moving it from Pasadena to the Wilshire Colonnade. Citysearch is taking 40,000 square feet at 3731 Wilshire Blvd. in a $1.30 per square foot sublease from Aames Home Loan.
In other deals, the General Services Administration renewed its lease for 27,500 square feet at 2600 Wilshire Blvd. in a five-year, $4 million deal. At One Park Plaza, 3250 Wilshire Blvd., United Title added 21,000 square feet at $1.40 per square foot for five years at $3.5 million. The Lambda Legal Defense & Education Fund leased 5,000 square feet on the 13th floor at ACF Plaza, 3325 Wilshire Blvd., for five years at $350,000.
The churn was far less further west, as brokers were hard-pressed to find any deals of note beyond eUniverse’s departure from 6300 Wilshire Blvd. to the Hughes Center.
“We mostly saw little deals last quarter because there’s just no big space available,” said Jerry Snyder, principal at J.H. Snyder Co. “It’s mostly small footprints and lots of long-term lease clients like SAG and AFTRA.”
Net absorption (the amount of space newly occupied less the amount newly available) improved, but remains firmly in the negative. This time last year, absorption was negative 170,994 square feet. It improved in the second quarter to negative 116,417. Net absorption remains poor because there has been so little leasing activity.
“Miracle Mile properties will continue to see decent absorption as tenants in Century City and Beverly Hills look for cost-effective options nearby,” said Toliver Morris, leasing director at McCarthy Cook & Co.
Still, the mood in this segment of the submarket is decidedly cautious.
“Business is pretty rotten, generally,” Snyder concluded. “If the economy bounces back and we get rid of the Enron stuff there are still so many factors. The Grove is giving us some confidence about this area.”
– Beyond Shelter leased 48,000 square feet for approximately $1.25 per square foot at 501 S. Virgil Ave.
– Lambda Legal Defense & Education Fund signed a five year, $350,000 lease for 5,000 square feet at ACF Plaza.
– Los Angeles County Department of Health Services leased 60,000 square feet for 10 years at around $1.30 per square foot or $10 million at Metroplex Wilshire.
– Asiana Airlines consolidated within the Metroplex Wilshire, taking 14,000 square feet for 10 years at $1.45 per square foot.
– The General Services Administration renewed its lease for 27,500 square feet at 2600 Wilshire Blvd. in a five-year, $4 million deal.