The departure of Farmers Insurance Group from its longtime Wilshire Boulevard headquarters is a blow to the already struggling Park Mile submarket.
The insurance company will move to Woodland Hills, vacating more than 400,000 square feet at three office buildings at Wilshire and Rimpau boulevards and plans to put the properties up for sale.
Farmers’ 1,400 Park Mile employees will transfer to the company’s Warner Center offices at 6301-03 Owensmouth Ave., a 570,000-square-foot office complex it intends to fully occupy over the next five years as other tenants move out of the buildings. It has a lease for 238,000 square feet at the property now.
The Owensmouth building had been occupied by 21st Century Insurance when Farmers acquired the company in 2009 for $1.9 billion. It consolidated its Simi Valley office into the location in 2011 and has renamed the property Farmers Plaza.
Park Mile already suffers from a 26 percent first quarter vacancy rate, one of the highest in Los Angeles County, as tracked by Jones Lang LaSalle Inc. It has had a hard time competing against neighboring Miracle Mile, which offers better shopping and restaurants as well as higher-quality buildings.
An additional 400,000 square feet of vacant space added to the about 1 million-square-foot Park Mile market will shoot the vacancy rate up by about 45 percentage points – bringing it to about 70 percent.
Farmers has occupied the Wilshire buildings for decades and is interviewing real estate brokerages for the listing.
One of the properties, built in 1937, maintains its historical character but needs an expensive seismic upgrade that the company wants to avoid.
The asking price has not yet been determined, but sales rates in the neighborhood generally range from $185 to $426 a square foot.
“This offers a significant opportunity for an owner-user or a value-add investor to occupy or own a large office project in the middle of the city,” said Michael Soto, research manager in the downtown L.A. office of real estate services firm Transwestern. “Park Mile has traditionally been a more quiet submarket than Miracle Mile to the immediate west but a forward-looking owner with enough patience could attempt to change that perception over the long term.”
Westside Slowing?
For the first time in a year, there is a little more available creative office space near the beach.
The first quarter vacancy rate for this specialized open-concept space in the Westside ticked up from the previous quarter to 12 percent, according to a report from Santa Monica brokerage Industry Partners Inc., which specializes in creative space.
The increase comes even as the booming tech and entertainment industries have been filling up Westside creative office space at breakneck speed. The increase doesn’t mean Westside is in trouble just yet, however. On a year-over-year basis, the vacancy rate actually slightly declined.
The report suggests that the small uptick is simply a blip after the fourth quarter last year in which more than two-thirds of the year’s total net absorption occurred.
“Industry Partners sees the relative lack of activity for creative office space only as a brief lull after the storm of activity that took place at the end of 2012,” the report reads. “Following this brief respite, Industry Partners expects a very active second and third quarter particularly in Culver City and Playa Vista.”
Rental rates, typically a measure of tenant demand, continued to climb, jumping seven cents to $3.38 a square foot.
New Firm
A former Trizec Properties Inc. executive is launching a commercial real estate brokerage in Century City.
Andy Stewart, former director of leasing at Brookfield Office Properties Inc.-acquired Trizec, founded the firm BentleyGlobal this year after receiving financial backing from two undisclosed investors.
Stewart said he felt the time was right to start a firm.
“The economy is picking up steam and there’s job growth in the United States and whenever there’s job growth there’s an opportunity in real estate,” he said.
The company will focus on landlord and tenant representation, asset management and property management for office, retail and industrial space across the country. BentleyGlobal took about 6,000 square feet at 1999 Avenue of the Stars in Century City last month. It opened with a staff of five but hopes to increase that to 17 in a year’s time.
It is already under contract for asset management at 4 million square feet worth of commercial real estate nationwide, including a 368,000-square-foot warehouse in Indiana occupied mostly by Ford Motor Co. and two Ohio office buildings occupied by Medical Mutual Insurance.
Staff reporter Jacquelyn Ryan can be reached at [email protected] or (323) 549-5225, ext. 228.
