By LAUREN HOLLINGSWORTH
Contributing Reporter
The sky-high office vacancy rates in the Wilshire Corridor are starting to trickle down, but the area remains one of the most troubled office markets in Los Angeles County.
“The whole area Mid-Wilshire, Miracle Mile and Park Mile is really behind,” said Kinden Mitchell, a research analyst at Cushman & Wakefield Inc. “The (buildings) are older. It’s just not desirable.”
Of the three areas cited by Mitchell, the largest is the Mid-Wilshire market, from Wilton Place (near Crenshaw Boulevard) to Hoover Street east of MacArthur Park.
To the west, the Park Mile district runs from Highland Avenue to Wilton, while the Miracle Mile covers the area from San Vicente Boulevard to Highland.
For the second quarter of 1998, the vacancy rate in Mid-Wilshire stood at 27.6 percent down from 28 percent in the first quarter and 28.5 percent in the fourth quarter of 1997, according to Cushman & Wakefield.
That 27.6 percent rate is still the second highest in Los Angeles County (the Los Angeles International Airport area is tops at 30.7 percent), but with office rents climbing elsewhere, Mid-Wilshire is gradually becoming more attractive, commercial brokers say.
“For the quality you get, it’s probably the best deal in the basin,” said Chris Runyen, senior associate at Grubb & Ellis Co. “Next quarter, we’ll probably have a lot more deals to announce.”
Mid-Wilshire, which includes much of Koreatown, was once a premier office district. But now it suffers from aging, run-down buildings and the lack of easy freeway access. Local business leaders, who prefer to call the area “Wilshire Center,” have established a business improvement district in hopes of reviving the area, said Gary Russell, the executive director of the Wilshire Center Business and Improvement Corp.
Major activities in the second quarter included the purchase of the 84,500-square-foot 3921 Wilshire Building by David Lee from First Korea Bank, and the lease of 62,000 square feet in the 2601 Wilshire building by the County of Los Angeles.
The county plans to spruce up the space and locate Department of Social Services workers there by early 1999, Runyen said.
“That area has been dead for a long time,” said Runyen “so that’s a landmark deal.”
Park Mile has a lower vacancy rate than Mid-Wilshire, but it lost ground in the second quarter with the vacancy rate rising to 25.4 percent from 21.1 percent in the first quarter.
In the Miracle Mile, vacancy rates declined to 22.1 percent in the second quarter from 22.9 percent for the previous three months.
Of the three areas, Mitchell said Miracle Mile is doing the best because of its proximity to Beverly Hills. The area is also getting attention as a burgeoning entertainment district, with the opening of the popular Conga Room on Wilshire near La Brea Avenue and the presence of the El Rey Theater nightclub nearby.
Second quarter Miracle Mile action included Kennedy-Wilson Inc.’s purchase of the 132,000-square-foot 6380 Wilshire Building from Beverly Carlton Associates. Kennedy-Wilson is now renovating the structure.
“We acquired it and converted it from an old schlocky B building to an A building,” said Nick Kanieff of Kennedy-Wilson. The company plans to finish renovations in September, and then lease the space through Madison Partners.
Also in the second quarter, Wilshire Capital bought the 59,000-square-foot Wilshire Carthay Medical Center from Wilshire 6333 T.D. LP.
In addition, the 1920s-vintage Wilshire Center building at 5410 Wilshire Blvd. is being renovated by Beekman Place Management, which plans to have ground-floor retail topped by new office space.
Miracle Mile brokers also report that E! Entertainment Television has been in talks to lease space in the Wilshire Courtyard at 5700-50 Wilshire Blvd. The cable network is believed to be outgrowing the 125,000 square feet it now leases next door at 5670 Wilshire Blvd.
“They’re seriously considering the Wilshire Courtyard,” said Douglas Econn, a senior consultant at Metrospace/Cresa Corp., “but we haven’t come to terms yet.”
E! could easily move all its operations to the Courtyard, which has about 400,000 square feet available now or in the near future, said Rick Buckley, a senior broker at CB Richard Ellis.
E! spokeswoman Louise Rasho said she could not discuss any pending leasing deals.
Wilshire Courtyard got at least one new tenant in the quarter. An entertainment company, Another Large Production, signed a lease in mid-June for Sept. 1 occupancy of 17,000 square feet of space at 5750 Wilshire, according to Vincent Pellerito of Cushman Realty Corp. Another Large Production will vacate its current space at 6430 Sunset Blvd.
To the north, the Hollywood/West Hollywood area saw its office vacancy rate dip from 20.6 percent to 19.7 percent. This area has a relatively small office market, and space is tight in the few class-A buildings available.
The real action in the second quarter was in the retail-entertainment front.
In April, the Community Redevelopment Agency approved the development agreement for the $385 million TrizecHahn Center at Hollywood Boulevard and Highland Avenue the centerpiece of what Los Angeles officials hope will be a new Hollywood entertainment district.
A month later, the Los Angeles City Council approved the sale of $90 million worth of bonds to help finance the project, which will include a new theater that will host the annual Academy Awards ceremony. In all, the project will have 600,000 square feet of space, including 400,000 square feet for retail and restaurants. Official groundbreaking is scheduled for October.
Brokers say approval of the project has made Hollywood a hot ticket again.
“Tons of people are looking to buy in Hollywood,” said Stacy Vierheilig, managing director of the sales and leasing group at Charles Dunn Co. “People can’t buy anywhere else for $100 a square foot, (and) we have great restaurants around us. We have all the amenities.”
Dunn spent $1 million to renovate the lobby of the 6255 Sunset Blvd. building and is upgrading the rest of the building floor by floor, said the on-site leasing agent, Gail Pena.
One new tenant is Walt Disney Co. division Buena Vista Television, which moved into 8,000 square feet of space in May.
Pena said other major entertainment companies are negotiating for space in the building.
Also in the second quarter, Bracha LP purchased the 39,000-square-foot 1800 Argyle Avenue office building in Hollywood.
“When you look at Hollywood and you talk about a competitive set of buildings, you’re talking about a dozen buildings at best,” says Kanieff of Kennedy-Wilson. “(But) it’s a market that’s having a comeback. I’m incredibly optimistic.”
