There were signs of life in the long-struggling Mid-Wilshire submarket during the second quarter and it’s due to a lot of little deals that have driven vacancies down and rents up.
Meanwhile, farther west, the Miracle Mile continued to show strength, with a slight drop in vacancy rates and slight increase in asking rents.
Of the two submarkets, Mid-Wilshire was the one that saw the more noticeable improvement. “There’s definitely volume in the submarket,” said Jeff Nasrallah, director of research for Grubb & Ellis Co.’s West L.A. office. “Everyone leased a little, sort of knocking away at the space available.”
That sent Mid-Wilshire’s office vacancy rate to 24.0 percent, down from 26.1 percent in the first quarter, according to Cushman & Wakefield Inc.
“The volume of deals is good for the market,” said Nick Kanieff, president of Kennedy-Wilson International’s commercial real estate investment group. “It shows there’s solid demand. It’s not just one tenant making a big grab.”
The transactions weren’t enough to budge Mid-Wilshire’s average monthly rental rate, which remained at $1.16 a square foot, virtually unchanged from $1.17 in the first quarter.
But the effective rates at Mid-Wilshire’s top buildings have bucked the trend by increasing about 15 percent so far this year, according to John Ollen of Insignia/ESG.
“Where we were hoping to get $1 to $1.05 (per square foot, monthly), we’re now getting $1.25 to $1.30,” he said. “We’re seeing some migration from the Westside and not as many people are leaving.”
Miracle Mile, meanwhile, saw its average asking rent inch up to $1.94 a square foot from $1.91 in the first quarter. “In the top buildings, we’re seeing a collective occupancy factor of 90 percent, with average rents at $2,” Kanieff said.
Those properties include 6300, 6380 and 6500 Wilshire Blvd., and the Wilshire Courtyard at 5700 and 5750 Wilshire.
The biggest second-quarter deal in the Miracle Mile was Cedars-Sinai Medical Center’s lease of 50,000 square feet at 6380 Wilshire. Overall, tenants absorbed 134,637 square feet of office space in the Miracle Mile during the quarter, according to Cushman & Wakefield.
The slight improvement in the Miracle Mile was attributed to spillover effect from the booming Westside. “We’ll see those rents continue to rise, especially as the Westside fills up,” said Bob Safai, owner of brokerage firm Madison Partners. “They’ve only got 40 to 50 million (square feet) of inventory (on the Westside), and new construction is nominal most of it’s in Santa Monica and most of it’s pre-leased.”
Many of the Miracle Mile entertainment deals were small, nowhere near the size of E! Entertainment’s 250,000-square-foot lease at Wilshire Courtyard in the fourth quarter of 1998.
But Kanieff expects the action to pick up as the Westside and Tri-Cities markets get tighter and rents rise. “I think we’ll see entertainment companies move to Miracle Mile or Hollywood because they need the space. In Miracle Mile, they can get class-A buildings comparable to those on the Westside, and at lower rates. That’s an easy formula for success.”
If the just-inked Western Initiative Media lease for 130,000 square feet at 7500 Wilshire Blvd. is any indication, the tide is coming back.
In the Mid-Wilshire submarket, the top deals were two leases signed by the County of Los Angeles 20,000 square feet at 3303 Wilshire Blvd. and 7,000 square feet at 3055 Wilshire.
Additionally, the Frank Lanterman Regional Center, a family counseling concern, renewed its 30,000-square-foot lease and took an additional 10,000 square feet at 3303 Wilshire.
The Abbey Building at 3550 W. Sixth St. also saw lots of activity during the quarter, signing 36,000 square feet of new tenant deals. Transactions included 19,000 square feet leased to the Department of Child and Family Services, 10,000 square feet to the General Services Administration/Census Bureau and 7,000 square feet to the YWCA.
? Cedars-Sinai Medical Center leased 50,000 square feet at 6380 Wilshire Blvd.
? Frank Lanterman Regional Center renewed a 30,000-square-foot lease and expanded into an additional 10,000 square feet at 3303 Wilshire Blvd.
? The County of Los Angeles leased 20,000 square feet at 3303 Wilshire Blvd. and 7,000 square feet at 3055 Wilshire Blvd.
? The Department of Child and Family Services leased 19,000 square feet at 3550 W. Sixth St.
? U.S. General Services Administration and the Census Bureau jointly leased 10,000 square feet at 3550 W. Sixth St.