WILSHIRE - Tenants Finding Bargains at East End of Wilshire Market Conor Dougherty of Los Angeles Business Journal
- The Los Angeles County Department of Health Services signed a 70,000 square foot, 10 year lease leased at 3530 Wilshire.
- The office building housing the Los Angeles County Department of Social Services, 2601 Wilshire Blvd., was sold for $11.7 million to S&R Wilshire LLC.
- Jamison Properties bought the Wilshire Serrano building at 3699 Wilshire for $24 million and the Wilshire Professional Building at 3875 Wilshire for $4.5 million.
- Softect Solutions signed a seven-year lease for 11,000 square feet at 3325 Wilshire.
Real estate leasing activity along the Wilshire Corridor was pulled eastward over the course of the last quarter, with tenants drawn by lower office rents in the region from Vermont Avenue west to LaBrea Avenue
"If you look at the rental rates at Mid-Wilshire, they're still 50 percent below the next best market," said Chris Runyen, vice president at Grubb & Ellis Co. "There's too big of a gap for people to ignore what that market has to offer."
And given the recent numbers, it appears there are a lot of bargain hunters out there.
The Wilshire Center market tightened last quarter, as vacancy rates fell to 14.8 percent from 16.2 percent in the previous period, according to Grubb & Ellis' most recent market survey. Vacancies were at 17.9 percent for the like period a year ago. Diminishing vacancies were reflected in increased net absorption - 102,766 square feet were absorbed last quarter, up from 39,293 in the second quarter, a 162 percent increase.
Despite the increased demand, asking rents in the Corridor dropped to $1.30 per square foot from $1.42 in the earlier period.
Runyen said the influx on tenants has come from traditionally price-sensitive sectors - non-profits and government agencies.
He expects to see continued movement of entertainment and media clients into the area, a trend he said has been going on for about two years. "They're looking to decrease their overhead or achieve more space for the buck," he said. "They can re-create what they have in Hollywood for half the price."
Notable leases last quarter included a 7-year, 11,000 square feet lease signed by Softect Solutions at 3325 Wilshire for about $1 million. Also, the Los Angeles County Department of Health Services signed a 70,000 square foot 10?year lease at 3530 Wilshire.
LOS ANGELES BUSINESS JOURNAL
WILSHIRE Struggling Tech Firms Turn To Area to Save on Leases
MARGOT CARMICHAEL LESTER
The dot-com downturn seems to be benefiting the Wilshire Corridor. As lots of Internet startups move to cut costs, the area's relatively affordable office rents are looking increasingly attractive to companies that are being priced out of the Westside.
"It's all about economics and parking," said Chris Runyan, a broker with Grubb & Ellis Co. "(Tech) companies are smarter and less bullish. They don't have millions to spend anymore, so they have to stretch their dollars. Most of the buildings they're moving into land around $1.25 per square foot (per month). That looks good not only to them, but to investors who want to see these companies keep costs low."
Overall, the Wilshire Corridor continued to perform steadily in the third quarter, driven by robust action in the long-downtrodden Wilshire Center submarket, which is also known as Mid-Wilshire.
The submarket's vacancy rate dropped to a respectable 17.9 percent in the third quarter, improved from 20.5 percent in the second quarter, according to Grubb & Ellis.
The improved vacancy rate came as the result of strong net absorption (the amount of space newly occupied minus the amount newly available). Office tenants absorbed 186,373 square feet of Wilshire Center space in the third quarter, a big jump from the 29,143 square feet they absorbed in the second quarter.
And that strong leasing action is pushing up rents, with the average monthly rental rate for class-A space rising to $1.34 per square foot in the third quarter, up from $1.28 in the second quarter.
Unlike other submarkets in L.A. County, Wilshire Center hasn't really seen a slowdown in leasing by technology companies, Runyan said.
"(Dot-coms) are still close enough to the entertainment companies located in Santa Monica and on the Westside, but they don't have to pay for the premium real estate," he said. "It's a good solution."
The 3000 block of Wilshire Boulevard was especially busy in the third quarter.
At Central Plaza at 3440 Wilshire, Click2Asia.com leased 28,000 square feet, and EducationBox.com took 7,000 square feet. In addition, the California Design College renewed its lease for 25,000 square feet.
At Metro Plaza at 3530 Wilshire, BrainRush leased 22,000 square feet. Just down the block, Future Media took 25,000 square feet at 3580 Wilshire.
Meanwhile, Marian College renewed its deal for 12,000 square feet at 3325 Wilshire, while HostPro, a Web hosting company, took an additional 18,000 square feet at 3250 Wilshire.
"We're really excited about what's happening in Mid-Wilshire," said Runyan. "We're seeing a pretty good jump in activity this year."