Yes/No Neighbors

To see two sides of the coin in how cities deal with development, look no farther than Glendale and Burbank. Glendale has allowed developers to build thousands of new apartments in recent years, to the point that the city is now looking for other types of projects. Burbank, on the other hand, has been closed to many large apartment projects but open to thousands of new entertainment jobs. As a result, the city needs to grow its housing market for local employees who can’t find places to live. Between the two extremes lie hotels – a safe bet for developers as they wait to see if the cities’ new directions translate to new projects. Peter Steigleder and Kelly Betpolice, managing principals and commercial real estate brokers with Hudson Commercial Partners Inc. in Studio City, represent clients who feel the best strategy for proposing new projects in Burbank is small hotels. Two new hotels were recently completed in the city, and more are in the works. The pair are negotiating the sale of a 20,000-square-foot parcel along South Glenoaks Boulevard in Burbank’s downtown commercial district for a client who wants to build a 90-room hotel there. “We feel it has a good chance of being approved because it’s not multifamily and it’s a hotel – just where the city wants to go,” Betpolice said. Glendale Sitting northeast of downtown Los Angeles and west of Pasadena, Glendale has great access to jobs and entertainment. In recent years, it has boosted the number of apartments and high-end retail tenants around central attractions such as the Americana at Brand and Glendale Galleria malls. Brokers including Craig Stevens, senior managing director at Charles Dunn Co. Inc. in Los Angeles, put the number of new apartments at about 4,000 units for those that have been approved, are under construction or about to start construction between 2013 and 2019. Some of the newest complexes are The Harrison, a 164-unit complex above a CVS pharmacy and Onyx Glendale, a 183-unit complex with 6,000-square-feet of retail space. But a cooling off of large apartment projects is evident in the city’s map of proposals submitted this year so far, in which the largest is for a 66-unit senior affordable housing community on 5th Street and Sonora Avenue. Brokers say apartment developers are “putting the brakes on” new projects, and that both the city and developers feel the market is near saturation. Chalvis Evans, senior vice president with CBRE Group Inc. in Los Angeles, said he’s getting fewer bids from developers when opportunities come up to buy available land in Glendale. A year ago, he was getting 10 to 20 bids per project; lately it’s been five, he added. “I just feel like it’s slowing down; people are being more cautious,” Evans said. “They are saying we can’t push rents any more than we have. But a year ago it was red hot. Two years ago – the same thing.” Some brokers say Glendale is halting new apartment projects to gauge the traffic impacts from the already approved projects once tenants move in. Tina LaMonica, senior vice president of NAI Capital Inc., attributes Glendale’s slowdown to other factors. As apartment complexes get taller and therefore denser, there’s less and less parking – and it’s a problem for several cities including Glendale, she noted. “The cities are aware of it, and are very sensitive to new projects and their parking requirements,” LaMonica said. Additionally, development is now at the peak of its seven-year cycle, she added, so developments that are proposed now wouldn’t complete until the downward slope starts and may take longer to lease up. Lastly, Glendale has minimal land for sale. “You would have to buy several lots to get a big project,” LaMonica said, and land prices are increasing. “Right now, landowners want top dollar.” Development in Glendale has been focused in the downtown area, and has followed the guidelines of the Downtown Specific Plan of 2014, said Darlene Sanchez, deputy director of community development for the Glendale Economic Development Corp. The plan aimed to create a thriving downtown which has attracted retail, restaurants and housing, creating an environment for the tech employers the city has focused on bringing in, she added. Recent efforts to attract entertainment venues are now paying off with the new Antaeus Theatre Co. that just opened and a complex with Laemmle Theatres and apartments due to finish soon, Sanchez said. Now, the city is casting its net to attract new hotels and conference centers, she added. Hotels under construction or in review include the Hyatt Place Hotel, one block west of Brand Boulevard with more than 170 rooms, and an Aloft hotel by Marriott International Inc., which is seeking approval for 84 rooms. Sanchez said her department is talking with a hotel group about building a 140-room hotel, and that’s she’s aware of at least three other possible sites. “We see this as a good sign – it’s that next evolution of what we have now,” she said. “We have big retail, restaurants and housing, and now you need somewhere friends and family can stay.” Burbank With a few exceptions, Burbank has closed the door to large developments of all types in recent years, but particularly residential projects. Stevens, the Charles Dunn broker, said Burbank has approved only 800 new apartment units in the last decade and that has resulted in a housing shortage. Stevens said he is skeptical there will be a change in the city for large residential development. “I think there will be a lot of talk” but nothing else, Stevens said, adding “there are not many big pieces of land to build on.” Other brokers share the skepticism, such as Hudson principals Steigleder and Betpolice. “Developers have come to Burbank in the past, and results have always been negative,” Betpolice said. “Hence, developers have changed their interest level in Burbank, and have focused in other cities that are friendlier.” Some brokers point to a lack of available land to build on, particularly in the Media District, as a reason for Burbank’s resistance, Plus, it doesn’t have the high-end retail amenities that Glendale has, and Burbank has parking issues, brokers say. “It wants to be conservative on how it approaches this, whereas Glendale has said, ‘Bring it on,’” Evans of CBRE said. “Burbank, in my opinion, is doing it the right way.” Patrick Prescott, who oversees planning for Burbank as community development director, said the city is facing a housing shortage. About 200,000 people work in the city on any given day, he said, and many can’t find places to live there because the rental vacancy rate is only 3 percent. It’s triggering the City Council toward a more favorable attitude on housing, he added. “What we’ve realized is that we’ve been really good at getting jobs,” Prescott said. “What we haven’t been good at is getting housing built. There’s resistance to existing residential development. Most people equate housing with more traffic. The challenge to figure out with the council and community is how do we grow responsibly.” Burbank has approved some large residential projects, such as the 241-unit apartment complex Talaria at Burbank above a Whole Foods Market by Burbank developer Cusumano Real Estate Group and currently under construction. Right now, there are between 1,000 and 1,200 mixed-use apartment units being reviewed by the city, Prescott said. The First Street Village project proposes 283 apartments. Premier on First at 103 E. Verdugo Ave., would build 154 residential units above retail. And the redevelopment of the vacated IKEA store and site seeks to bring nearly 1,100 multifamily housing units plus a 200-room hotel. The city now wants to learn the numbers that represent market demand for housing, Prescott said, so the economic development department has hired an outside consultant to determine that. Then, the city will have to figure out how much housing Burbank should allow to be built, while still maintaining a high level of service for residents. “If the numbers we’re hearing are correct, we’ve underbuilt for the last two decades,” Prescott said. In contrast, hotels in Burbank have had less challenges. Two just opened in the city – a Hilton Garden Inn and a SpringHill Suites by Marriott, both on South San Fernando Boulevard – and others are seeking approvals. For cities, hotels bring in both property and bed taxes, making them a win-win, said Stevens. “Hotels bring more revenue,” he explained. “Apartments, except for a raise in (property) taxes, don’t bring in anything. The reality is, everybody loves a hotel, and hotels are very much in demand.”