By: Linda P. Lee
Vacancy Rates: Glendale 14.1%; Pasadena 10.1%; Burbank 3.8%
As of the end of the fourth quarter 2007, the Tri-Cities office market (includes Burbank, Pasadena and Glendale) consisted of 18.3 million square feet of non owner-user office space within buildings greater than 20,000 square feet.
The Tri-Cities office market ended the quarter with a 9.6% vacancy rate and over 300,000 square feet of negative absorption. While Burbank led the market with the lowest vacancy rate of 3.8%, up slightly from 3.4% during the previous quarter and 3.6% one year ago, Glendale had the highest vacancy rate of 14.1%, representing an increase from 13.2% during the previous quarter but a decrease from the 16.2% vacancy of one year ago. The most significant change occurred in Pasadena. Although in the middle at a 10.1% vacancy, it is very significant that Pasadena’s vacancy was at 6.2% during the previous quarter and 4.7% one year ago at this time. Pasadena increased its vacancy rate by 63% over just one quarter and 115% over one year. (It is significant to point out that Pasadena’s dramatic increase in vacancy in the fourth quarter of 2007 was primarily due to IndyMac Bank vacating over 200,000 square feet of office space and 160,000 square feet of it was out of one single building in East Pasadena.)
All three submarkets experienced “negative absorption”, meaning more space was vacated than leased, during the fourth quarter of 2007. Burbank experienced the least amount of negative absorption at only 23,000 square feet and Glendale experienced a negative absorption of 52,000 square feet while Pasadena led the market with over 260,000 square feet of negative absorption. For all of 2007, Glendale was the only submarket within the Tri-Cities office market to experience a positive net absorption which was over 80,000 square feet. Burbank experienced 14,000 square feet of negative net absorption for the year and Pasadena experienced approximately 345,000 square feet of negative net absorption. The 80,000 square feet of positive absorption in Glendale was primarily due to a few tenants leaving Pasadena and relocating to Glendale. The most significant of those tenants was Yellow Pages, Inc., who moved from Pasadena to Glendale earlier in 2007. As of the end of fourth quarter 2007, the average asking rental rate for Class A office space in the Tri-Cities office market was $3.28 per square foot per month on a full service gross basis. The average asking rental rate for Class B office space was $2.88. Both Class A and Class B office space have seen tremendous growth over the last several quarters within the Tri-Cities office market and that trend is expected to level off as those numbers approach the average asking rental rates for the entire Los Angeles County office market, which is currently at $3.49 per rentable square foot per month for Class A office space and $2.52 per rentable square foot per month for Class B office space.
Overall, the Tri-Cities office market continues to be among the most stable of the various markets within Los Angeles county. Although the market experienced negative net absorption of over 300,000 square feet and increased vacancy during the entire 2007, the market continues to be bullish about the future. Currently, two Class A office buildings totaling over 800,000 square feet are under construction in Burbank and due to be completed during the first quarter of 2009. Maguire Properties has commenced construction of 207 Goode Ave, a 187,000 square-foot Class A office building due to be completed by the second quarter of 2009. In Pasadena, Investment Development Services, Inc. is planning a 150,000 square-foot office development at the corner of Colorado Boulevard and El Molino Avenue in the Pasadena Playhouse District area and the Shoppes at Fair Oaks, LLC is moving forward with the development of a 30,000 square foot office building with ground floor retail on Fair Oaks Avenue just north of Colorado Boulevard in Old Pasadena to be delivered during summer of 2009.
Linda P. Lee
Vice President, Grubb & Ellis Company,
445 S. Figueroa St – Suite 3300
Los Angeles, CA 90071. Tel. 818-502-8025– Tel 213-596-2277–Fax 213-488-0819