Market Emerging as Popular Alternative for Telco Deals.

THE strength of the Wilshire Corridor office market continued, through yearend, as Wilshire Center remained a solid performer and the Miracle Mile and Park Mile areas saw rents spike upwards.

The vacancy rate in the Wilshire Center submarket dropped to 14.1 percent in the fourth quarter, from 17.9 percent in the previous period. In the year-earlier period, the vacancy rate was 21.1 percent, according to Grubb & Ellis Co.

The increase in leasing activity was coupled with flattening rents, as the average monthly asking rent for class-A space barely rose from $1.34 per square foot in the third quarter to $1.35 in the fourth. The average asking rent hovered around $1.29 a foot in the year-earlier quarter. Net absorption (the amount of space newly occupied less the amount newly available) increased appreciably in Wilshire Center, moving from 186,373 square feet in the third quarter to 282,083 square feet in the fourth quarter.

One of the most notable transactions in the fourth quarter was GlobalOne Communications' lease of 30,200 square feet at 3810 Wilshire Blvd. in a 10-year, $9.3 million deal. The lease is significant because it translates to about $2.50 per square foot, much higher than the submarket's average asking rate.

"That's similar to the rates paid for a class-A telco hub downtown," said Chris Runyan, a vice president with Grubb & Ellis. With downtown telecommunications space getting harder to find, Mid-Wilshire has emerged as a viable alternative.

"I expect we'll see more telco deals moving into Wilshire Center this year," Runyan predicted.

Elsewhere in Wilshire Center, creative services firm Three Ring Circus signed a 30,000-square-foot sublease deal at 3699 Wilshire from the St. Paul Cos. for an undisclosed amount. Micron Technology Corp.'s Hostpro Inc. subsidiary expanded further with 20,000 square feet at 3250 Wilshire in a five-year lease valued at about $2 million. Insurance company United Title Co. relocated to the same building from nearby Chateau Place, taking a five-year, $1.5 million lease for 17,000 square feet for a new headquarters.

The Koreatown Association purchased a 68,000-square-foot, six-story building at 3727 W. Sixth St. from JKS Investment Group for $2.2 million. "It didn't sell for much, but they're planning significant renovations," Runyan noted. It should be on line by year-end.

Two companies left Wilshire Center for downtown. Daniel, Mann, Johnson & Mendenhall, an architecture, engineering and construction services firm, vacated 100,000 square feet at 3250. Wilshire; and health plan L.A. Care vacated 100,000 square feet at the Metroplex, moving to the Gas Company Tower.

Despite those significant departures, the market's office vacancy rate remains low.

According to Grubb & Ellis, the Miracle Mile/Park Mile submarket saw its vacancy rate tick slightly higher in the fourth quarter, coming in at 12.4 percent, up from 9.4 percent in the third quarter. That deterioration was caused by negative net absorption of 148,039 square feet in the fourth quarter, following negative net absorption of 23,757 square feet in the third quarter. The pullout may have been prompted in part to an increase in rental rates, with the average monthly asking rent rising to $2.44 per square foot in the fourth quarter, up from $2.35 in the previous quarter.

Farmers Insurance continued its expansion in the submarket, taking 12,000 square feet at 4601 Wilshire for just over $2 per foot. Farmers currently occupies several entire buildings in the area and has several floors in others. Nonprofit educational organization the Galef Institute signed a sublease for 14,800 square feet at 5670 Wilshire in a 45-month, $1.6 million deal. At Museum Square, located at 5757 Wilshire Blvd., commercial printer Quebecor signed for 15,663 square feet in a 10-year, $4.7 million deal.

"The migration from the Westside continues to drive up rates in the Miracle Mile/Park Mile," said Bob Safai of Madison Partners. "The difference (in monthly rents) between this and other Westside markets is still a dollar or two per square foot. That's pretty hot."

Wilshire Corridor

Major Events:

* GlobalOne Communication leased 30,200 square feet at 3810 Wilshire Blvd. in a 10-year, $9.3 million deal.

* Creative services firm Three Ring Circus subleased 30,000 square feet at 3699 Wilshire from the St. Paul Cos. for an undisclosed amount.

* Micron Technology Corp.'s Host pro Inc. subsidiary expanded further with 20,000 square feet at 3250 Wilshire in a five-year lease valued at about $2 million.

* The Galef Institute subleased 14,800 square feet at 5670 Wilshire Blvd. in a 45-month, $1.6 million deal.

* Commercial printer Quebecor signed a lease for 15,663 square feet of space in a 10-year, $4.7 million deal at Museum Square, 5757 Wilshire Blvd.