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Lower 1987 Vacancy Rate Seen Downtown

November 16, 1986

The absorption rate of downtown Los Angeles office space may carry through to single-digit vacancy rates by early 1987, according to estimates by Grubb & Ellis Co. Commercial Brokerage Services, while the 1986 occupancy rate is assured of topping the 1985 figure.

Raymond M. Lepone, senior marketing consultant with the firm, said the absorption rate will be increasing because new construction is expected to taper off during the next two years.

At the end of the third quarter, nearly 100,000 square feet of space had been committed, keeping the vacancy rate at a stable 15.8%. A year ago, it was 17.5%.

The firm's study of 58 downtown structures indicated that space leased during the third quarter amounted to 98,467 square feet, pushing the year-to-date total to 919,144 square feet. That places the absorption of space just 14,607 square feet short of the 1985 total, assuring that leasing activity during the final quarter will surpass the sum of last year's leasing total, Lepone said.

The survey showed that 3.7 million square feet of office space was available in the third quarter, from an existing base of 23.8 million square feet.

During the previous quarter, 3.4 million square feet had been vacant while the inventory figure was the same. Historically, Lepone noted, 20 years ago, the inventory downtown totaled only 3 million square feet.

He singled out the Federal Reserve Bank, under construction at 950 S. Grand Ave., as the only commercial building under way that will be completed this year. Of the federal agency structure's 300,000 square feet, only 40,000 will be available for lease, he said.

Four other major downtown projects also are under construction and will add 2.2 million square feet of space upon expected completion in 1987-88. They are Biltmore Place, with 412,000 square feet in a combination project; the Reliance Building, 452,000 square feet; 865 S. Figueroa Building, 692,690 square feet and Transpacfic Development, 661,000 square feet.

Also, plans for a long-awaited project, at the northwest corner of Wilshire Boulevard and Figueroa Street., have just been announced by Mitsui Fudosan U.S.A. A a $200-million, 50-story tower will be erected on the site, long occupied by the Episcopal church's St. Paul's Cathedral.

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