Arco Acquisition Worsens Vacancy Rate Downtown

As has been the case so many times over the last decade, merger and acquisition activity is dumping more high-rise space on the struggling downtown Los Angeles office market.

With the recent acquisition of longtime local stalwart Atlantic Richfield Co. by BP Amoco, Arco’s already-shrinking downtown operations will dwindle even more.

The merged company has engaged real estate services company Insignia/ESG to sublease nine floors that the oil company has been occupying in the 52-story Arco Center at 333 S. Hope St.

BP Amoco has already subleased much of the space Arco once occupied at its longtime corporate headquarters, the nearby Arco Plaza on Flower Street. Most remaining Arco employees have joined their colleagues at 333 S. Hope, known as Security Pacific Plaza throughout most of its history.

The oil giant will also vacate the 250,000-plus square feet on floors 12 to 20 that it is obligated to lease for 12 more years. That’s nearly half the space building owner Metropolitan Life Insurance Co. had to refill during the recessionary mid-1990s, when Security Pacific Bank was acquired by Bank of America.

The space BP Amoco will gradually vacate at 333 S. Hope increases downtown’s high vacancy rate by roughly three-fourths of 1%, said Paul Lentz of Transwestern Commercial Services.

While real estate companies have varying methodologies, most calculate the 34-million-square-foot downtown office market’s overall vacancy--including space available for sublease--at around 25%.

BP Amoco is asking $24 per square foot annually for offices in what’s generally considered one of the region’s highest-quality office towers, said Insignia/ESG’s R. Todd Doney, who is handling the sublease with Nico Vilgiate.