Impact on Rentals by Tower Fire Assessed : Short-Term Market Results Held Minimal, but Renovation to Add to Downtown Space

The May 4 fire at the 62-story, 1,009,000-square-foot First Interstate Bank tower will have little or no short-term impact on the downtown office space market, but it could have a long-term one, according to Burnett Facer of Grubb & Ellis Commercial Brokerage Services.

His comment was made coincidently with the release of a report by Grubb & Ellis showing that about 7 million square feet of office space will be added to the downtown area in the next five years.

Facer said about 250,000 square feet were vacant in the building at the time of the fire. All of the tenants can be accommodated, given the 12.37% vacancy factor cited by Grubb & Ellis (3.9 million square feet vacant from an existing base of 24.7 million square feet).

However, if the First Interstate building is completely rebuilt, as is anticipated, it would add about 1 million square feet to the nearly 7 million square feet that will be added over the next half-decade, he said.

“Vacancies are hovering around 5% in the most sought-after and prestigious downtown locations,” according to Jeffrey C. Carey, vice president and district manager of the downtown L.A. Grubb & Ellis office.

Ten structures, from the 1.2-million-square-foot California Plaza II and Grand Place to the 350,000 square-foot Figueroa II, will add 6,943,690 square feet of space to the downtown inventory. Not included on the list because it is already under construction, is the Library Square project. It will stand at 73 stories and contain 1.3 million square feet and will be the largest and tallest tower in the region when completed in the early 1990s.