Mid-Wilshire, Miracle Mile deals being transacted by small tenants.

Two buildings in the Mid-Wilshire submarket reported major lease renewals during the third quarter, but office leasing remained flat overall in both Mid-Wilshire and the Miracle Mile during the third quarter.

At the Equitable Plaza Building, leasing manager Steve Miller said the Equitable Life Assurance Society of Los Angeles renewed its lease for five years and plans to move into 30,127 square feet of remodeled space as part of the deal. The building, owned by Rosenberg Real Estate Equity Funds, has undergone a renovation in which asbestos has been removed, much of the space has been remodeled and a new sprinkler system has been installed.

Meanwhile at Central Plaza, leasing manager Linda Hedden reported the Los Angeles County Development Services Foundation signed a five-year renewal of its lease for 28,000 square feet at 3440 Wilshire Blvd. Hedden added that a new tenant at the 3440 Wilshire building, California Design College, signed a five-year lease on 6,000 square feet.

Miller and Hedden both said their buildings signed a number of smaller deals in the quarter.

"The market continues to be mainly in the 1,000- to 3,000-square-foot deals, and we've signed a few of those this quarter," Miller said. "We have also had a good bit of activity in terms of showings of space. And deals that are actually in the proposal stage and the lease negotiation stage have picked up quite a bit from the second quarter."

Miller said the increased activity appeared to result from lease expirations. "People are saying 'Hey, my lease is up and I need space, so I'm going to sign a deal,'" he said. "Mid-Wilshire still offers a good value because a lot of the buildings have gone through rehabilitations, and some of the tenants are realizing it's a good time to take advantage of a soft economy."

According to commercial brokerage firm Julien J. Studley Inc., the vacancy rate in the Mid-Wilshire market was 19.9 percent as of Aug. 31, down 0.1 percent from the 20 percent vacancy rate reported at the end of June.

The 19.9 percent rate at the end of August, however, was up slightly from a year earlier, when the vacancy rate was 19.7 percent.

Over the past year, Studley reports show the vacancy rate for Mid-Wilshire's 15.2 million square feet of office space ranged from a low of 19.1 percent to a high of 21.3 percent.

Studley reported 281,884 square feet of space was leased in the market during July and August, down from 405,156 in the like two months last year.

From Jan. 1 through the end of August, 690,990 square feet of office space had been leased in Mid-Wilshire, way down from 1.24 million square feet at the end of August last year.

In the Miracle Mile market, office broker Steve Bloom of Cushman & Wakefield of California Inc. said more tenants were looking at space during the third quarter, but the increased activity hadn't translated into many new signed leases by the end of the quarter.

Said Bloom: "The activity has picked up in terms of there being more prospective deals that we're looking at and negotiating on, but there haven't been a whole lot of signed deals. It does look like there are more prospective tenants who are giving Miracle Mile the chance in terms of having a shot at the deal."

Bloom said that for the 6300 Wilshire building, for which Cushman & Wakefield is the exclusive leasing agent, an "aggressive" (low) commissions policy has been instituted in an effort to win more tenants.

"We already have an aggressive brokerage commission policy, but then we've increased that depending on how big the deal is or how many years it is. One of the things we're doing is a 25-cent-per-square-foot-per-year bonus. For example, on a five-year deal that could be another $1.25 per square foot that the tenant's broker could earn," Bloom explained. He said the higher commissions are a way of encouraging more brokers to have their tenants look at a building.

According to Rosey T. Miller, a senior marketing consultant with commercial brokerage firm Grubb & Ellis Co., a number of other buildings in the Miracle Mile are now offering comparable commission increases as landlords intensify their competition for tenants.

"Most of the marketplace has done that (increased commissions)," Miller said. "The bottom line is that a good broker is going to recommend the best building for his or her client; it's not going to be driven by fees. It (raising commissions) is more of a way for landlords to almost ensure that they're going to get a chance to look at all the deals. But the decision is still made by the tenant."

Miller concurred with Bloom that "there seems to be a slight upturn in activity within the past two to three months" in the Miracle Mile submarket.

"We'll have to see if this upturn remains, but we have seen an influx of smaller tenants in the 1,000- to 3,000-square-foot range," he said.

Miller said one prospective deal is an entertainment company that needs 40,000 square feet of space and is looking primarily in the Miracle Mile.

"We should have that wrapped up in the next 30 to 45 days, and it will be most likely in the Miracle Mile," Miller said, although he added that the company is also considering several buildings on the Westside.

Miller noted that the entertainment industry is "one of the few sectors that we really see generating incremental activity in terms of taking on more space." Miracle Mile buildings usually find themselves competing primarily against buildings in the Westside and Tri-Cities markets, Miller said, adding that Miracle Mile usually offers lower rents.

Bloom added that those rents dropped sharply this year when the competition for tenants led some landlords to "get very aggressive." But rents appear to have stabilized since then, he said.

"We are seeing more prospective tenants now from areas west of us. I think they look at us as an economic alternative to some of the markets on the Westside," he said.

Rents appear to have bottomed out, he said, as landlords have finally realized that price remains a crucial issue for tenants.