Empty Sites Tower Over City

Owners of two of the largest office buildings in Burbank are struggling to fill the space, an indication that businesses are being cautious as the economy recovers from the recession. The Pointe, a 15-story office tower on Alameda Avenue in the media district, and the 2300 Empire building adjacent to the Empire Center have been completed for more than a year and have been vacant since. The Pointe was developed by M. David Paul & Associates and 2300 Empire is owned and managed by Clarius Partners, based in Chicago. The Pointe will be getting its first tenant this summer when an entertainment company moves to Burbank from Hollywood. The tenant was identified as Outlook Amusements by Mary Hamzoian, the city’s economic development director. Outlook is an interactive marketing and media company that produces and distributes new age and metaphysical entertainment services. Repeated attempts to reach Jeff Worthe from M. David Paul and a representative from Outlook Amusements were not successful. Steve Duncan, a partner at Clarius, did not return multiple phone calls. The two buildings combined put 800,000 square feet on the market, an enormous amount of space to fill in a city with a Class A and B office space vacancy rate of 13.9 percent for the first quarter. City officials, however, are not in a panic mode, confident that the benefits of being in Burbank will eventually attract companies. The buildings owners are doing the smart thing by not just taking anyone as a tenant instead are waiting for ones that make sense, said City Manager Mike Flad. “The tendency (during a recession) is to panic and make short-term decisions with long-term implications,” Flad said. “The patience they are showing is important.” The difficulties faced by Clarius and M. David Paul are common throughout the country. In the second quarter, office buildings nationwide lost 1.8 million square feet of occupied space, according to Reis Inc., a research firm based in New York. For the quarter, the national office vacancy rate was 17.4 percent, the highest level since 1993, according to Reis. CoStar Group, however, painted a more optimistic picture with a mid-year forecast that the office market had bottomed out and the vacancy rate was no longer rising. Dismal market In the Los Angeles area, the office real estate market is dismal and there is no sign that it has hit bottom, said Bill Watkins, the executive director of the Center for Economic Research and Forecasting at California Lutheran University. As the economy recovers businesses are cautious about making long-term commitments and so new leases will lag behind, Watkins said. Business owners will find it easier in this climate to do nothing rather than make a decision without knowing what the future holds, added Cathy Scullin, a senior vice president in the Encino office of NAI Capital. That doesn’t bode well for large buildings needing tenants. At 15 stories, The Pointe is one of the taller buildings on the Burbank skyline. When M. David Paul bought the land from NBC Universal in 2005 along with it was restrictions that any structures be occupied by entertainment and media tenants. A building of that size will appeal to companies on the higher end of the entertainment industry that will need entire floors rather than those that would need less space, Scullin said. “When you are fishing in that pool there are not that many fish,” Scullin said Getting noticed By getting its first tenant, The Pointe may now get a second look by other media companies because they like to be around each other. “Nobody wants to be the first tenant in an empty building,” Watkins said. The 2300 Empire building cost $130 million to build and was the last phase of the Empire Center mixed-use development with retail stores, restaurants and hotels. But like The Pointe, construction was completed during the worst of the recession and getting signed leases proved a challenge. “They had a lot of prospective tenants but none panned out,” Hamzoian said The city does its part to bring in tenants by staying in communication with the building owners and stepping up its marketing efforts to promote the benefits of being in Burbank. The city, for example, does not have a gross receipts tax, streamlined its planning process and makes its leadership available. Burbank also has a special charm, an aura of creativity and has one of the healthier office markets around, Scullin said. “If I were a building owner, I would want to own a building in Burbank,” Scullin said.