New-media companies continued to be attracted to the Wilshire Corridor during the first quarter, as rents soared and available space dwindled on the Westside.
“We’re seeing a lot of companies looking at the area who have experienced sticker-shock on the Westside,” said Chris Runyon, associate vice president at Grubb & Ellis Co. “That’s when this area becomes attractive.”
The Miracle Mile section of Wilshire between San Vicente Boulevard and Highland Avenue in particular saw a lot of activity in the first quarter.
Office vacancy in the Miracle Mile/Park Mile submarket fell to 11 percent in the first quarter, down sharply from 20 percent in the fourth quarter of last year, according to Grubb & Ellis. The submarket’s net absorption (the amount of space leased minus the amount vacated) was a respectable 90,258 square feet.
Rents were up as well, with the average class-A monthly asking rent hitting $2.26 per square foot in the Miracle/Park Mile, up from a fourth-quarter average of $2.17 and $2.03 in the year-earlier period.
Most of the recent lease deals were signed by entertainment and Internet companies enticed by lower rents in a location convenient for Westsiders.
Creative Planet moved into about 50,000 square feet in Wilshire Courtyard at 5700 Wilshire Blvd., taking on a one-year lease while the Internet company looks for more contiguous space in the area.
E! Entertainment Television’s old home, the 411,000-square-foot high-rise at 5670 Wilshire Blvd., is being renamed the ArtistDirect building and is now about 95 percent leased since Internet firm ArtistDirect relocated there from Encino.
“Right now we’re seeing a tremendous supply-and-demand imbalance, and we’re seeing single-digit vacancy rates (in many buildings),” said Rosey Miller, senior managing director with Julien J. Studley Inc. “The space environment is different from the ’80s, when the surge of interest was due to entertainment companies expanding. Today, the primary drivers of space are not only entertainment but technology and technology-related companies.”
Miller anticipates leasing activity to remain robust throughout the second quarter. “Technology and technology-related tenants are scampering around locking up space right now,” he said.
Even the long-struggling Mid-Wilshire area east of Wilton Place, also known as Wilshire Center, saw some leasing activity during the first quarter, dropping its vacancy rate to 20.6 percent, down slightly from 21.1 percent at year-end 1999.
Linda Hedden, leasing manager for Central Plaza and Metro Plex in Mid-Wilshire, had some of the biggest transactions. “We’ve seen quite a bit of activity in Wilshire Center,” she said. “It’s been a busy beginning of the year, especially in the Internet technology sector.”
Hedden leased 100,000 square feet at Central Plaza, with Click2Asia.com leasing 30,000 square feet and E4World.com leasing 14,000. The rest of the square footage was taken up by a number of tenants committing to smaller spaces.
At the Metro Plex building at 3530 Wilshire, U.S. Jobber took a full floor, 22,000 square feet. In the same building, Global Webnet leased 19,000 square feet. Hedden said she is preparing a lease for another full floor in the building for another dot-com company.
Meanwhile, the Computer Education Institute signed a five-year lease for 23,000 square feet at 3699 Wilshire during the quarter, according to Runyon of Grubb & Ellis.
Also in Mid-Wilshire, Universal Reprographics Inc., a digital printing and graphics company, sold its 33,400-square-foot headquarters at 2706 Wilshire to Ronald E. Ricker for $2.1 million.
The market also saw a good deal of leasing from small tenants, who continue to dominate the area.
“The market is, and will be for quite some time, small to medium-size tenants in the 2,000- to 5,000-square-foot range,” said John Anthony, director of sales and leasing at Charles Dunn Co. Anthony added that future activity will be coming from the county and from new-media and telecom companies, which he said are shopping the market right now.
Despite all the activity, class-A asking rents in Mid-Wilshire stayed stagnant at $1.28 a square foot, down a penny from the fourth quarter of 1999.
Amid the Mid-Wilshire’s first-quarter activity, Dr. David Lee was notably inactive. Lee, who has purchased a number of buildings in the area over the past few quarters, did not engage in any transactions during the quarter, according to Chuck Bruni at Jones Lang LaSalle, who has worked with Lee on various building investments.
“He’s been silent on the acquisition front,” Bruni said. “He’s been prowling around the downtown area.”