The 10-mile Wilshire Corridor, stretching westward from downtown Los Angeles to Beverly Hills, remains an area in flux.
The Mid-Wilshire submarket, which stretches from downtown to Western Avenue, has struggled with high vacancy rates, hotel closures, shuttered department stores and a somewhat dingy image.
But just to the west of Mid-Wilshire is the Park Mile submarket, reaching from Western to Highland Avenue. Featuring mostly lowrise office buildings with low rents and free parking, the Park Mile area has become more attractive to tenants seeking modest rents in respectable buildings and relatively safe environs.
Perhaps the best performer of the three Wilshire Corridor submarkets is the Miracle Mile, the section of Wilshire from Highland Avenue to San Vincente Boulevard, which is also where Beverly Hills begins.
The E! Entertainment tower, Wilshire Courtyard, and the Museum Square building are prominent in this submarket, which has been enjoying an influx of tenants who find rents a bit stiff in on the Westside.
“What’s going on, and what will continue to go on, is that as other (Westside) submarkets tighten, and as the availability of large blocks of contiguous space diminishes, then the Miracle Mile will look more and more attractive,” said Vincent Pellerito, a broker with Cushman Realty Corp. in Century City.
Some brokers report good leasing activity. “We just leased 10,000 square feet to the National Medical Review at 5900 Wilshire (the Mutual Benefit Life building),” said Rick Buckley, broker with CB Commercial Real Estate Group Inc. “There is definitely activity in the Miracle Mile.”
Would-be Miracle Mile renters won’t find space in the E! Entertainment tower, at 5670 Wilshire. “It’s 100 percent leased,” reports Jerry Snyder, chairman of J.H. Snyder & Co., which owns the structure. “It’s not a lot of new tenants moving in. It’s been more from existing tenants growing.”
The Miracle Mile submarket is strong enough that Snyder is considering erecting a new 70,000-square-foot building on a site across the street from E! Entertainment.
“If I could get it half pre-leased, I would go ahead with it. The tenant could put their own marquee on the building,” he said. “I’ve got the plans sitting on my credenza, right next to me. They’ve been sitting here for years.”
Snyder has some cause for optimism: In the third quarter, the Jewish Federation leased 90,000 square feet in Snyder’s Wilshire Courtyard complex at 5700-5750 Wilshire, leaving about 200,000 square feet empty at the 1 million-square-foot complex.
Said Snyder, “I am in negotiations on 100,000 square feet right now, but I can’t say who.”
(Snyder in January filed for Chapter 11 bankruptcy protection on Wilshire Courtyard, because he couldn’t keep currrent with payments on $300 million in debt. He is trying to work out a deal with creditors.)
But development of the Wilshire Corridor remains some time off, according to real estate insiders.
“It’s hard to imagine a major development in the Wilshire Corridor. I don’t think we are there yet,” said Pellerito of Cushman Realty.
Nevertheless, conditions are good enough that real estate investment trusts are sniffing around. “Yeah, I’ve had a few REITs in here to talk about buying (properties in Miracle Mile). It’s just lately that they entered the picture for Mid-Wilshire,” said Snyder. “They could buy everything. It wouldn’t bother me.”
The Actors’ Equity Association recently agreed to move into Snyder’s Museum Square building at 5757 Wilshire Blvd., and will occupy 10,000 square feet there in December, according to Pellerito. It was an $1.8 million lease.
There are buyers for Mid-Wilshire properties if the price is right. Chicago-based CMD Realty Investors Inc. bought the 104,00-square-foot Park Mile Center on Wilshire near Highland from Travelers Insurance Co. in the third quarter, according to Dave Warren, senior vice president at CMD. Warren would not disclose the purchase price, but real estate sources put it at $6.7 million. That works out to about $65 a square foot, a far cry from what Westside buildings command.
Overall, the outlook is generally improving for the Wilshire Corridor, due largely to the better regional economy. The vacancy rate for the Mid-Wilshire submarket dropped to 25.9 percent in the third quarter still high, but improved from 30.6 pecent a year ago. The rate was as high as 31.8 percent in the fourth quarter of 1995, according to Grubb & Ellis Co.
The vacancy rate for Miracle Mile and Park Mile, combined, dropped slightly to 20.1 percent, from 21.2 percent a year ago.
Even with the improvement, in general such vacancy rates as found in the Wilshire Corridor are regarded as high.
A “good” office market vacancy rate, according to brokers, is one below 10 percent, and a few hands can remember the late 1970s, and again in the late 1980s, when rates below 5 percent were common in many L.A.-area markets.
Moreover, the reported vacancy rate excludes available sublease space and in the real estate markets of the 1990s, many downsizing firms have been trying to sublease their surplus office space.
There is only one other office market in Los Angeles County LAX-Century Boulevard that has a higher office vacancy rate than the Wilshire Corridor, according to Grubb & Ellis.
In the Wilshire Corridor, monthly asking rents range from a low of 85 cents a square foot to $1.60, according to Grubb & Ellis, with rents rising the further west one goes along the corridor. Snyder said rates in the Miracle Mile run from $1.80 to $2.20 per square foot per month.
How long will companies continue to express interest in moving into the Wilshire Corridor, or at least the western reaches of it?
Snyder thinks as long as the economy keeps growing. “I get asked that all the time, ‘How long will it last?’ I think it will last as long as the economy improves,” he said.
One market not inspiring much confidence is Mid-Wilshire near downtown. There are some positives: A new Metropolitan Transportation Authority subway stop has been erected at Western and Wilshire, and Southwestern Law School has taken over the landmark Bullock’s Wilshire department store building for use as a law library.
But Mid-Wilshire office vacancy rates remain very high, and few new tenants are moving in. “I think what it would take to cause a resurgence in the Mid-Wilshire market would be for some large corporate users to move in. But I see the opposite happening,” said Pellerito. “There are some small entrepreneurial users moving in.”
Big users looking for bargain space are instead being attracted to downtown Los Angeles, and are bypassing Mid-Wilshire, said Pellerito. “Most major decision-makers live on the Westside, or Pasadena. They are willing to discount Mid-Wilshire. Crime is a concern, too.”
The Korean-American Museum leased 5,000 square feet in the Wiltern Theater building, on Western and Wilshire. Chris Karas, a Grubb & Ellis associate who brokered the deal, said the market has improved enough that tenants aren’t dictating terms.
“Two or three years ago, you get tenants really putting in low-ball offers, saying, ‘We are going to pay this, and you have to take it because you don’t have any other tenants.’ But now, we are not that desperate,” said Karas.
And even if rents aren’t rising in Mid-Wilshire, “they don’t seem to be going down,” said Karas.
Chicago-based CMD Realty Investors Inc. bought the 104,000-square-foot Park Mile Center on Wilshire Boulevard near Highland Avenue from Travelers Insurance Co. for an estimated $6.7 million.
The Jewish Federation leased 90,000 square feet at the Wilshire Courtyard complex at 5700-5750 Wilshire Blvd., leaving about 200,000 square feet empty at the 1 million-square-foot complex.
The National Medical Review leased 10,000 square feet at 5900 Wilshire Blvd., the Mutual Benefit Life building.
Actors’ Equity Association leased 10,000 square feet at the Museum Square building at 5757 Wilshire Blvd. It will relocate there in December.
The Korean-American Museum leased 5,000 square feet in the Wiltern Theater building on Western Avenue and Wilshire Boulevard.
Southwestern University puts finishing touches on its conversion of the closed Art Deco Bullock’s department store into a school law library. The retrofit is a hallmark in the creative use of abandoned space, and prevents another Mid-Wilshire building from presenting an abandoned face to the street.