By: William R. Boyd, Jr.
The Tri-Cities (Burbank, Glendale and Pasadena) office market maintained its 18.5% vacancy at the end of the second quarter of 2013 which was the vacancy in the market as of one year ago. The Tri-Cities office market vacancy had dropped to 17.9% (within the total 23.2 million square feet) at the end of the first quarter of 2012.
The market’s vacancy is largely attributable to Disney’s vacating the 3900 West Alameda building in Burbank which added over 450,000 vacant square feet to that city’s available office space. The landlord, BlackRock, Inc., has now placed that building up for sale.
According to information published in the Los Angeles Business Journal, the corridor experienced a net loss (vacancy) of approximately 12,000 square feet that was vacated in the 2013 second quarter and a vast improvement compared to the loss of nearly 590,000 square feet in the first quarter of 2013.
Glendale and Pasadena experienced positive net absorption (leasing) of approximately 22,000 and 6,000 square feet, respectively, during the second quarter of 2013. Burbank’s continued negative absorption in the second quarter 2013 (40,000 square feet) caused that city’s vacancy to increase to 20.7% of the city’s 7.6 million square feet of office space. This current Burbank office space vacancy is the highest ever experienced in the past 35 years.
The Pasadena office market performed the best of the three cities over the past year as its 233,000 square feet of absorption in the fourth quarter of 2012 helped reduce that city’s vacancy to 14.7% currently from its 15.4% vacancy one year ago despite its first quarter 2013 negative absorption. Glendale’s vacancy also improved to 21.6% currently from 23.6% last year at this time.
Most observers are cautiously optimistic that Burbank will be able to lease the amount of added vacant space on the market within the next two years. “Burbank’s media district experienced single digit vacancy for many years and we’re optimistic that the entertainment industry’s historic appetite for office space will continue,” said Linda P. Lee, a Senior Managing Director of the Glendale office of the Charles Dunn Company. Craig Stevens, a commercial broker with Colliers International, confirmed that the 480,000 square foot office tower at 3900 West Alameda in Burbank (recently vacated by Disney) is “ground zero” within Burbank’s Media District and should lease soon. Stevens had worked with the building’s developer and assembled the land for the building’s development in 1988.
The Burbank and Pasadena quoted rental rates are averaging $3.36 and $2.54, respectively. Glendale’s quoted average rental rate for Class A office space has dropped only three cents over the past year on a fully serviced basis to $2.54 per square foot today. The 701 North Brand office tower in Glendale has recently welcomed six new tenants to that building over the past year and is quoting a rent of $2.25 per rentable square foot per month.
The recent announcement that the Glendale Galleria office tower will have a full office floor available in the second quarter of 2014 was a surprise to the market. The popular Glendale office tower has had Glendale’s highest occupancy rate for an office building in the city for the last several years and has not had a full floor available for over ten years.
The amount of Tri-Cities office space vacancy, 4.2 million square feet within its 23.1 million square feet total, and slow leasing activity throughout the Tri-Cities market, is creating outstanding office space opportunities for those few tenants in the market seeking office space or those tenants looking to renew their current lease obligation.