By: William R. Boyd, Jr.
The Tri-Cities (Burbank, Glendale and Pasadena) office market vacancy decreased to 17.4% within the 23.5 million square feet of office space at the end of the 2014 second quarter. A positive net absorption of 116,000 square feet was leased within the Tri-Cities office market after having experienced 147,000 square feet of negative absorption in the previous quarter.
The market’s decrease in vacancy is attributable to Burbank’s 98,900 square feet of absorption and Glendale’s 83,000 square feet of net absorption, respectively, in the second quarter. Pasadena, surprisingly, lost another 66,000 square feet of occupancy after having experienced an additional 180,000 of negative absorption in the first quarter of 2014.
According to information published in the Los Angeles Business Journal, the corridor experienced a net drop in vacancy from 18.8% as of July, 2013 to the 17.4% vacancy at the end of the 2014 second quarter.
While Glendale and Burbank were the only cities to experience positive net absorption (leasing) in the past quarter it is a dramatic improvement from the 60,000 square feet of negative absorption (reduced occupancy) both cities experienced one year ago at this time. Burbank’s leadership in absorption caused that city’s vacancy to drop from 20.7% last year to the current 17.7% as of the end of the 2014 second quarter.
The surprising increase in Pasadena’s vacancy to 15.7%, from the 14.7% last year, is unique given the city’s historic leadership in tenant activity. Despite the loss of over 245,000 square feet of office tenants, Pasadena’s quoted rental rates increased by over $0.20 per square foot per month over last year’s quoted rents.
Most observers are optimistic that the reduced vacancy for the Tri-Cities overall is an indication that the benefits and amenities offered within this office market continue to be attributes preferred by office tenants. “While 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 Scott A. Unger, a Senior Associate of the Glendale office of the Charles Dunn Company. Craig Stevens, a commercial broker with Colliers International, confirmed that the 3900 West Alameda building in Burbank remains “ground zero” within Burbank’s Media District although the 477,000 square foot project remains vacant. Stevens had worked with the building’s developer and assembled the land for the building’s development in 1988.
The quoted rental rates of all three cities increased in the second quarter 2014 and are quoted on a fully serviced basis per rentable square foot per month at $3.15 in Burbank, $2.65 in Pasadena and $2.52 in Glendale.
The Glendale Galleria office tower currently has a full office floor (approximately 16,400 rentable square feet) currently available after the building had been fully occupied for the last seven years. Other buildings such as 550 North Brand and 330 North Brand in Glendale have experienced additional leasing and currently have less vacancy than last year at this time.
The amount of Tri-Cities office space vacancy, 4 million square feet within its 23.5 million square feet total, and moderate leasing activity throughout the Tri-Cities market, continues to create outstanding office space opportunities for those few tenants in the market seeking office space or those tenants looking to renew their current lease obligation.