‘Dot-Coms’ Spin Web Along Miracle Mile
Another wave of relocations by media and entertainment companies is quickly filling up the remaining vacant office space in the Miracle Mile district of Los Angeles. But some of the newest arrivals share one distinct difference from the show biz firms that moved to the historic neighborhood east of Beverly Hills in the early 1990s.
The difference is the Internet. Indeed, it appears the “new media” operations flocking to the district’s eclectic mix of office buildings represent a convergence of “the biz” and “the Net.”
“I’m in ‘dot-com’ hell; we’re going absolutely crazy here,” said Toliver Morris, leasing director at Miracle Mile’s biggest and most luxurious office property, the 1-million-square-foot Wilshire Courtyard at Wilshire Boulevard and Curson Avenue.
“It seems like we get a call every week now from another creative dot-com group that needs 20,000 or 30,000 square feet,” Morris said. Such calls are decidedly non-hellish for landlords such as McCarthy Cook & Co., which operates the Courtyard on behalf of its financial partner Blackstone Group.
The common thread linking most of the dot-coms moving to the Miracle Mile area is their focus on media and entertainment.
“Maybe we should rename it the ‘Media Mile,’ ” Morris quipped.
Among the latest creative dot-coms relocating their headquarters to the district: music-related network ArtistDirect Inc. and entertainment-related Web site designer Creative Planet. FasTV.com, a company that allows users to search for video footage over the Internet, has been based in the district for about a year and is expanding its headquarters fivefold.
Statistics from brokerage CB Richard Ellis indicate that overall Miracle Mile office vacancies (including sublease space) have fallen steadily from more than 25% in mid-1997 to below 13.4% by the end of 1999. The district’s average rents have risen during that period, from $1.72 per square foot to $2.03. The trend is continuing this year, with vacancies at just over 12%, according to real estate researcher CoStar Group Inc.
The area’s lure is the same as it was in the early 1990s, when such show biz tenants as Spelling Entertainment, the Variety publishing group and guilds SAG, AFTRA and Actors Equity arrived, drawn by the district’s relatively attractive rents and ample space. But market fundamentals are much different today.
In the early 1990s, a wave of office development, combined with a severe recession, enabled many tenants to move to better offices throughout Los Angeles without paying higher rents. Prominent Miracle Mile buildings such as Wilshire Courtyard, the original CalFed headquarters tower next door and the renovated Museum Square just across Wilshire proved especially attractive to tenants moving from Hollywood, where properties were generally older and less well maintained.
This time around, the migration to Miracle Mile is being driven by other factors. Hollywood is finally undergoing its long-awaited renaissance and is actually gaining tenants. Meanwhile, rents are climbing in the most prominent office districts to the west--Beverly Hills, Century City, Westwood, Brentwood, Santa Monica, West L.A.--as empty offices disappear amid a strong business climate.
“The large blocks of available space on the Westside are for the most part gone,” said Mark Robinson of tenant representative specialist Julien J. Studley, who negotiated ArtistDirect’s deal at the former CalFed tower along with colleague Craig Jablin.
Robinson added that the few Westside buildings under construction typically have “10 companies bidding on the space”--helping drive rents skyward.
So at least for now, it appears the Miracle Mile ranks among the few districts boasting available high-quality business space, relatively affordable rents and a critical mass of related commerce and support services.
But Miracle Mile office building occupancies and rents are also rising as the media-oriented Internet operations and other tenants move in, noted landlord Jerry Snyder, whose J.H. Snyder Co. renovated Museum Square and the CalFed tower and developed Wilshire Courtyard.
For instance, Creative Planet, which has far outgrown its incubator facility in North Hollywood, has yet to pin down enough space in the Miracle Mile to accommodate its anticipated growth, noted Allen DeBevoise, the company’s chairman and chief executive.
Creative Planet will probably need 100,000 square feet--more than twice the amount it is moving into through a one-year deal with Wilshire Courtyard. “We’re talking about making this our permanent home, but we’re not yet sure if [the Courtyard] can accommodate us” for the long term, DeBevoise said.
Polled by Creative Planet management about headquarters alternatives, employees preferred the Miracle Mile to San Fernando Valley, downtown Los Angeles and the Santa Monica area.
Along with comparatively affordable rents, DeBevoise and company like the district’s location among several big entertainment studios. He and others also point to the availability of nearby services and housing--including the big shopping center being built at Farmers Market and the nearly 1,400 new apartments slated for the periphery of the giant Park La Brea community.
The Snyder group has found tenants for nearly 250,000 square feet in the former CalFed tower in the last several months. The bulk of it was vacated by the E! Entertainment Television network, which moved next door to the Courtyard.
The 411,000-square-foot tower, which will be renamed the ArtistDirect Building, is about 95% leased now that the new anchor tenant is relocating its headquarters from Encino. FasTV.com just agreed to expand its headquarters in the building from barely 6,000 square feet to nearly 30,000.
Snyder has more space available at Museum Square, but mostly in smaller pockets. “If someone’s looking for 30,000 square feet, I can’t help them,” he said. Media outfits Virgin Entertainment and the Home & Garden Television cable network are among Museum Square’s newest tenants.
Snyder said he is asking prospective tenants for monthly rents of about $1.95 to $2.10 a square foot at Museum Square and $2.25 to $2.35 at the ArtistDirect Building. Rents are somewhat higher, about $2.40 to $2.75, at the Courtyard--but not nearly as high as upper-quality buildings further west, which can command rates of well over $3 a square foot.
Hardly any more space is available at the Courtyard in the wake of huge relocation deals with E! Entertainment and Initiative Media North America (formerly Western Initiative Media and relocating from Sunset Strip), and the recent 44,000-square-foot, short-term lease with Creative Planet. There is likewise little space available at some of the district’s other large office towers, such as 5900, 6100 and 6300 Wilshire Blvd.
“The Miracle Mile market’s getting pretty tight,” said DLJ Realty Services’ Gary Weiss, who along with colleague Jeffrey Strnad continues to seek a permanent home for Creative Planet.
He suggested that the district’s real estate entrepreneurs should consider major renovations for some of the older buildings, which date back to the 1920s. Kearny Street Real Estate Co. has done just that, renovating and filling up the 6330 San Vicente Blvd. building that was mostly vacant when purchased less than three years ago--and then selling it to Lexington Commercial Holdings for a nice profit.
