CVS Pharmacy Inc. has signed a lease for a new retail space near the Staples Center in downtown.
The space, which is 11,132 square feet, is located at 1212 S. Flower St. It is the ground floor of a five-story office building.
There are two high-rise multifamily properties on either end of the property with a combined 730 luxury units. The buildings are known as Hope & Flower.
Kennedy-Wilson Properties Ltd.’s Lee Shapiro and Justin Weiss represented the landlord in the transaction.
Terms of the lease were not disclosed.
“Despite higher vacancy rates resulting from Covid-19, our team remained confident in the lasting appeal of this high-profile, downtown core location,” Shapiro said in a statement. “We were thrilled to secure such a reputable national credit tenant for our client.”
The space is unique because it was initially meant to be used as office space, not retail space.
CVS, according to Kennedy Wilson, usually looks at spaces with drive-up parking, which the property does not have.
But the company “understood the benefits of opening a store at this highly visible location and was willing to make the necessary adjustments instead of building a brand-new, first-generation retail space,” Weiss said in a statement.
“DTLA has continued to showcase its resilience and staying power even through these unprecedented times. The fact that CVS executed a long-term lease to reposition a sizable office floorplate for a retail build-out in downtown amid a pandemic is a testament to their belief in the market,” he added.
Downtown’s retail market has faced some difficulties.
During the second quarter, the vacancy rate for retail real estate in the area reached 6.7% vacant, up slightly from 6.6% in the same period the previous year, according to data from Downtown Center Business Improvement District.
Average rent per square foot was $2.93, down 8 cents over the previous year, and there were 105,000 square feet of negative net absorption.
Still, there were some positive signs in the market, such as the opening of the highly anticipated Apple Tower Theatre at 9th and Broadway.
Weiss added that eight of 10 deals his team was working on in the area were second-generation spaces. But he said first-generation spaces, which tend to be larger, were seeing activity pick up as well.
He added that around 90% of deals he was seeing in the market had Covid arrangements, with owners providing flexibility or accommodation help for tenants.