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The Gas Company Tower in Downtown Los Angeles can’t catch a break, or even a tenant.
In another blow to Los Angeles’ office market, the CMBS bondholders for debt tied to the 54-story tower have rejected the city’s terms on a nearly 300,000-square-foot lease for its Housing Department to take 13 floors at the building, according to Newmark (NMRK)’s third-quarter office report. By itself, the lease would have meant a more than 11 percent increase on quarterly office leasing activity for all of Los Angeles, which tallied 2.6 million square feet, per Nermark.
The Department of General Services, which manages the city’s real estate activity, did not immediately return requests for information. Additionally, Colliers (CIGI), which is the exclusive leasing brokerage and property manager of Gas Company Tower, did not return requests for comment.
The 1.4 million-square-foot Gas Company Tower went into receivership in April after Brookfield (BN) defaulted on $748 million in loans tied to the property and the 777 Tower. A large lease with the city would have brought significant relief considering law firm Sidley Austin, which is the second-largest tenant at the Gas Company Tower, will soon vacate. Further, the value of the tower at 555 West Fifth Street deflated by 57 percent — from $632 million in 2021 to $270 million — in just two years.
Total office vacancy in L.A. hit a new high of 22.2 percent in the third quarter, according to Newmark. The brokerage’s report didn’t give much hope for improvement anytime soon.
“Most tenants continue to pursue trophy-grade, Class A space as they scale down their footprints,” the report read. “From a historical perspective, this quarter’s leasing activity of 2.6 million square feet can be categorized as lackluster at best.”
Gregory Cornfield can be reached at gcornfield@commercialobserver.com.
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