Improving Glendale Market Fails to Impress Industry Veteran

The Burbank and Glendale office markets were a mixed bag in the first quarter, though neither is anywhere near healthy. The Glendale office market showed modest improvement, with the vacancy rate inching down four tenths of a point to 21.1 percent. Average Class A asking rents dropped 6 cents to $2.45 a square foot helping the market absorb 26,700 square feet, according to the L.A. office of Colliers International. Still, William R. Boyd Jr., senior managing director at the Glendale office of Charles Dunn Co. Inc., was not impressed. “It’s pretty much status quo,” said Boyd, who has worked the market for some 30 years. “At about 100,000 square feet of absorption a year, we’d still have six or seven years before we get down to a healthy 5 percent. The demand is all with existing tenants looking to reduce the cost of their occupancy. But the vacancy rate stays static.” As an example, Boyd cites Hutchinson and Bloodgood LLP, a large accounting firm that has been in Glendale for decades. In the fourth quarter, the company relocated from an office at 101 N. Brand Blvd. to a cheaper space at 550 N. Brand Blvd. “At some point, the market is hoping things will accelerate, but it’s tough to predict what companies will grow into the space,” Boyd said. The real action in the city is the multifamily sector, where the city continues to encourage development, green lighting several new projects in the quarter, most notably the 70-unit Glendale Arts Colony slated for 140 N. Louise St. It narrowly won approval on a 3-2 Council vote. The $30 million low-income apartment project is a joint venture of L.A. non-profit developer Meta Housing Corp., the city and the local YMCA, which owns the land. It will be limited to artists and other creative types. Burbank continues to struggle, as the city has yet to turn things around from the spike in vacancy created by the consolidation of Walt Disney Co. in the first quarter last year. The vacancy rate rose nine tenths of a point to 21 percent in the first quarter as 63,000 square feet was put back onto the market. Landlords are beginning to accept the realities of the struggling office market, with average Class A asking rents down almost a dime to $2.95 a square foot. “Burbank has hit rock bottom, but I think it will spring back nicely over the next two to four quarters. There is still strong demand for the market,” said Nico Vilgiate, executive vice president at the downtown L.A. office of Colliers. “There may continue to be a rate adjustment to accommodate for the vacancy, but it won’t be substantial.” That’s not to say there wasn’t some good news for Burbank, as the Pointe office tower in the Media District is starting to fill up. The 14-story, 480,000-square-foot building at 2900 W. Alameda Ave. was constructed during the recession by Worthe Real Estate Group of Santa Monica. The landlord inked a 68,410-square-feet lease with Burbank film producer Legendary Entertainment for 10 years. “It took some time to get going with that building,” said Jeff Worthe, the developer. “But I expect to be leased up soon.” Worthe was busy on the buying front in the first quarter as well, closing on the very building that sent the city’s vacancy rate through the roof a year ago. Last month, Worthe paid $109 million for the nearly vacant Tower Burbank at 3900 W. Alameda Ave., which Disney left. The 32-story tower was sold by New York asset management firm BlackRock Inc. – Elliot Golan Main Events In January, the Subaru dealership in Glendale bought its 17,000-square-foot lot from Subaru of America Inc. of Cherry Hill, N.J. for $4.75 million. The auto dealership was built in 1992 and was renovated in 2009. The 1308 S. Brand Blvd. dealership put 10 percent down and took out a loan from its corporate parent for the remainder, according to CoStar. A 22-unit apartment building in Glendale traded hands in February for more than $5.6 million. The building at 239 N. Verdugo Road was purchased by Rouben Gourchounian of L.A. from the Avedis Khajerian Living Trust in Northridge. The 21,240-square-foot building was constructed in 1987 and was fully leased at the time of sale. In Burbank, Worthe Real Estate Group of Santa Monica paid $109 million for the nearly vacant Tower Burbank at 3900 W. Alameda Ave. The 485,000-square-foot tower lost its main tenant last year when Walt Disney Co. vacated about 470,000 square feet to consolidate workers into other buildings, including its headquarters. Tower Burbank was sold by New York asset manager BlackRock Inc. A building at the Howard Business Park in Burbank was purchased during February by Unique Vintage Properties LLC of Burbank. The 32,000-square-foot manufacturing building at 2830 Ontario St. was bought from KBC America Inc. Legendary Entertainment signed a 10-year lease at The Pointe in Burbank. The entertainment firm is occupying 68,410 square feet in the Media District tower at 2900 W. Alameda Ave. The tower was built in 2009 by Worthe Real Estate Group and struggled to get leased up through the recession. The building is now more than 75 percent leased. Burbank Office Market At a Glance Inventory 6.83 million square feet Under Construction 0 Class A Asking Rents $2.95 Glendale Office Market At a Glance Inventory 6.2 million square feet Under Construction 0 Class A Asking Rents $2.45