Downtown proximity, low rents boost eastern sector. (Real Estate Quarterly--Wilshire Corridor).

THE long swath of Wilshire Boulevard that makes up Wilshire Center continues to tell a tale of two submarkets.

Fourth-quarter rents and vacancy levels held steady in Wilshire Center, closer to downtown, and absorption (the amount of space newly occupied less the amount newly available) stayed positive.

But further west, Miracle Mile/Park Mile saw vacancies continue to climb as Class-A rents dropped and absorption headed further into the negative.

Vacancy in the overall Wilshire Center submarket continued its gradual decline, dropping to 12.3 percent from 12.8 percent in the fourth quarter and 13.4 percent in the year ago quarter, according to Grubb & Ellis Co.

Asking rents for Class-A space was flat at $1.36 per square foot per month in the January-to-March period, from $1.37 in the fourth quarter, though that was still an improvement over the $1.30 posted at the same time last year.

Net absorption fell to 59,025 square feet in the first quarter, from 96,164 square feet in the fourth. In the like period a year ago, absorption was 124,206 square feet.

"Almost 60,000 square feet of positive absorption is great," said Chris Runyen, vice president of Grubb & Ellis' office services group. "And Wilshire Center has the second lowest vacancy in the entire L.A. Basin."

The first quarter saw the submarket suffer from the wider inclination of businesses to stand pat as the war in Iraq loomed and the economy continued to lag.

"There have been a lot of tenants shopping the market," Runyen continued, "but then they realize that with renewals and a good tenant improvement package, they could save money by renegotiating with their current landlords."

The office building at 3701 Wilshire Blvd. saw a number of smaller tenants re-up. Five-year deals were inked by Procuraduria de La Republica de Mexico for 3,200 square feet, the Law Offices of Fred Fleming for 2,200 square feet and BUSI-COM Investments for 3,500 square feet. Ad agency Pancom International Inc. renewed its 6,000-square-foot lease for another three years.

Each of the transactions was at a $1.45 effective base rental rate. Though higher than the average asking rate, the figure is still lower than downtown's asking rate of $2.05.

"Wilshire Center/Koreatown is bucking the trend of increasing vacancy that is taking place in downtown and many other places," said Scot McBeath, marketing consultant with DAUM Commercial Real Estate Services. "Cheap rent may be why. Wilshire Center also offers much cheaper parking. The two locations are minutes away from each other, but miles apart in cost."

Miracle Mile/Park Mile continued to slide in the first quarter, with vacancy moving up to 19.2 percent from 18.1 percent in the fourth quarter and 14.4 percent a year ago.

Absorption dropped to negative 61,862 square feet from negative 38,252 at year-end as more tenants put sublease. space back on the market

"The direct vacancy rate is actually in the 11.9 to 12 percent range," said Marc Lebowitz, vice president at First Properties. Brokers estimate anywhere from 40,000-80,000 square feet of sublease space was on the market during the quarter.

"You have to put last year into perspective," said Mark Robinson, corporate managing director for Julien J. Studley Inc. "Landlords' asking rates didn't move much last year -- they were accented with a wink and a nod. Since the end of the year, asking rates have dropped significantly."

In a drive to lease up space, asking rates in the first quarter skidded to $2.05 per square foot from the mid-$2.20s throughout 2002.

"Clearly," Robinson said, "landlords have realized they had to get in the game."

That's the case at 6222 Wilshire Blvd., which was 50 percent occupied early in the fourth quarter. The 85,000-square-foot building is now 80 percent full, according to the leasing agent on the property, Mitch Stokes of Madison Partners.

Despite the increasing vacancy rate, the submarket was able to retain some large tenants.

The Hollywood Reporter renewed its 65,000-square-foot lease at 5055 Wilshire Blvd. in a 15-year deal at $1.90 per square foot. In early renewal deals, media firm VNU renewed its 70,000 square foot lease at 5550 Wilshire Blvd. (terms were not disclosed) and Ripley's Believe It Or Not re-signed for 15,000 square feet at $1.90 per in 5670 Wilshire in a one-year deal.

Some landlords refuse to play, however. Wilshire Courtyard has the highest rents between downtown and Beverly Hills.

Entravision Communications Corp., a Spanish-language TV provider, consolidated two offices in 40,000 square feet at the Wilshire Courtyard in a 13-year, $16.5 million deal. AEG Concerts took 16,000 square feet at about $2.20 per over 5 years at 5700 Wilshire.

The sizeable deals didn't eat up enough of the vacant space to lower the vacancy figure, said Bob Safai, partner at Madison Partners. "Vacancy is going up in spite of big deals because tenants in this market are still moving to 'more desirable' space in the Westside market that's available at the same or a better price."

RELATED ARTICLE: Major Events:

* Jamison Properties snapped up the 200,000-square-foot 3350 Wilshire Blvd. for $14.4 million.

* VNU renewed its 70,000 square foot lease at 5550 Wilshire Blvd. The terms were not disclosed.

* Ripley's Believe It Or Not took 15,000 square feet at $1.90 per foot at 5670 Wilshire Blvd.

* Hanley-Wood Publishing rented 8,000 square feet for 10 years at 6222 Wilshire Blvd.

* The Don Buchwald Agency leased 10,000 square feet for eight years at $2.25 per foot at 6500 Wilshire Blvd.

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