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Southern California | MARKET REPORT / MIRACLE MILE

On Road to Rebound

Spillover From Other Westside Markets Expected to Benefit Area

January 07, 1998|BOB HOWARD | SPECIAL TO THE TIMES

The late A.W. Ross would be pleased with what people are saying about his once-suburban shopping district.

Ross was the developer credited with creating the Miracle Mile in 1921 from what had been a dirt stretch of Wilshire Boulevard serving nearby barley fields and oil wells.

The grandly named blocks on Wilshire, which for a time made up one of Los Angeles' most fashionable shopping areas, have long since been eclipsed by different kinds of shopping centers. But they survive as an office district that real estate professionals believe will be one of the first to benefit as rents rise in nearby markets.

A 1998 forecast by brokerage Grubb & Ellis Co. calls the Miracle Mile--which stretches roughly from Highland Avenue to San Vicente Boulevard--one of L.A.'s "recently challenged" office markets that is likely to improve during the year.

Nearly 20% of the office space in the Miracle Mile is empty, compared with vacancy rates that are half that or less in such nearby markets as Beverly Hills, Santa Monica and Century City.

Rocketing rents and disappearing space in those other markets are already starting to benefit the Miracle Mile, real estate professionals say.

"With the other Westside markets tightening so much and rents going up so fast, companies are looking for alternative locations as a way to reduce their occupancy costs," said broker Rosey Miller, a senior vice president with Grubb & Ellis Co.

Miller expects the Miracle Mile to "become a catcher's mitt for tenants who don't want to pay the rents in the other Westside markets" or who might otherwise have located farther west.

Miracle Mile has recently shown signs of improvement to its relatively poor occupancy rate, said Miller. Vacancy fell by nearly 3% in the third quarter of 1997, the biggest decrease of any Westside Los Angeles office market in the quarter, he said.

Miracle Mile has been slow to join the real estate recovery because, until recently, so much quality office space was available at bargain rates in other nearby Westside markets, said Vincent Pellerito, a senior broker with Cushman Realty Corp.

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"Most companies wanted to be as far west as they could when the rental rates were lower" in other Westside markets, Pellerito said, but with the rates rising in those other markets, "Miracle Mile becomes a more attractive market."

Although Miracle Mile is less freeway-close than some other Westside markets, Pellerito said freeway access was not a major factor in its losing tenants during the recession.

Probably a more important factor is the shortage of restaurants within walking distance in the Miracle Mile, in contrast to places like Beverly Hills that have plenty of eateries, Pellerito said. "They pay a lot of money to be able to walk to lunch there."

Brokers say the Miracle Mile has a number of things going for it, most notably its location, quality office buildings and the presence of some prestigious tenants--an important consideration because businesses generally don't like to be real estate pioneers. Tenants include a number of high-profile entertainment businesses, among them E! Entertainment Television, the trade newspaper Daily Variety and Aaron Spelling Entertainment.

Among the most recent arrivals is Actors Equity Assn., one of three major Hollywood unions now based in the Museum Square building near the Los Angeles County Museum of Art. Actors Equity moved into Miracle Mile from Hollywood in December, said John Holly, the union's western regional director.

A primary reason for the union's move, Holly said, was to be close to two other important Hollywood unions--the Screen Actors Guild and the Assn. of Film, Television and Radio Artists--both also in the Museum Square building.

It helped too, he said, that "the buildings are a little classier and this is a better neighborhood" than the union's former locale at Sunset and Cahuenga boulevards.

While historians credit Ross with creating the Miracle Mile, brokers working there often credit developer Jerry Snyder with a big role in rejuvenating it. They say the Miracle Mile never really died as an office market, but it had lost much of its luster before Snyder renovated the 1947-era Museum Square building in 1982 and built the Wilshire Courtyard office complex in 1987, both on Wilshire between La Brea and Fairfax avenues. In 1990 he renovated the former California Federal tower at Wilshire and Masselin Avenue that is now home to E! Entertainment.

In many cases Miracle Mile's gains have been Hollywood's losses as entertainment companies moved out of Hollywood. Brokers expect to see more of that, along with defections from more expensive Westside buildings.

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