Glendale

In yet another sign that the once-booming office market in Glendale is on the ropes, Maguire Partners has put on hold a 750,000-square-foot complex in the city’s central business district. Company officials decided to shelve plans for two 12-story office towers after they were unable to pre-lease any of the project proposed for eight acres off the Ventura (134) Freeway between Brand Boulevard and Central Avenue. “It’s rather difficult to get financing when there’s no specific tenant in hand, and we don’t build on spec,” said Tim Walker, a partner with the firm. The company doesn’t intend to walk away from the development but will wait for the market to improve before attempting to resurrect it. “We have a set of plans in the drawer ready to go, our Environmental Impact Report has been accepted, but we’re just not ready to pull the trigger,” Walker said. Sources close to competing office projects dismissed Maguire’s problem as an anomaly, saying that the developer’s insistence on pre-leasing made it impossible to compete with Glendale Plaza, a 535,000-square-foot office tower developed by PacTen Partners that opened in the first quarter. But Walker and others say that the office market in Glendale, as well as neighboring Burbank, has lost steam a potentially important barometer for the rest of L.A. commercial real estate. When Maguire began pursuing its “sky-rise” two years ago, the market was booming, driven by phenomenal growth in the entertainment industry. But since then, players like Walt Disney Co. and Warner Bros. have stopped expanding, which cut into the demand for corporate office space. “I just don’t see the market there,” said Walker. “I wish that it were, but it isn’t.” Glendale Plaza, the largest new office tower to be built in L.A. County since the early 1990s, is only 30 percent leased despite a yearlong marketing effort by PacTen Partners. Meanwhile, Glendale’s overall vacancy rate rose to 16 percent in the first quarter ended March 31, up from 10.8 percent during the like period a year earlier. The increase was driven by the addition of Glendale Plaza, according to Cushman & Wakefield. In Burbank, plans for the Media Center, a joint venture of Equity Office Properties and J.H. Snyder Co. are dead in the water due to a lack of demand. Equity reportedly is attempting to sell the land while Snyder seeks $7.2 million in a breach of contract lawsuit filed against its partners. Bob Tague, Burbank’s development director, says high-end office space doesn’t appear to be moving well in either Burbank or Glendale. “The Maguire and PacTen buildings in Glendale and the Snyder project here are all expensive high-rises all in the $3 a square foot range,” he said. “There’s just not a demand for that sort of high-cost rental space.” Tague said demand appears to be stronger for more affordable, bite-sized space aimed at companies that need room for support staff. But John Barganski, vice president in charge of marketing and leasing for PacTen Partners, says things are not as bad as some contend. While Glendale Plaza has been unable to draw the entertainment players the developer sought, it landed two significant tenants and is on track to meet its target of being 50 percent full by summer. The State Compensation Insurance Fund signed a deal worth an estimated $35 million for 125,000 square feet in the building, and Regus Business Centres Corp. leased another 33,000 square feet. “To open your doors at a 30 percent lease rate is a significant accomplishment,” Barganski said. Paul Stockwell, corporate managing director for Julien J. Studley Inc., agreed Glendale Plaza’s long-term prospects are good because Glendale remains an important center for banking and commerce. Despite the slowdown, average asking rental rates in Glendale increased from $24.77 in the fourth quarter of 1998 to $26.30 in the first quarter of this year, and from $25.15 to $26.60 during the like period in Burbank. But Stockwell sees the rates leveling off or declining until the market absorbs Glendale Plaza and other projects. Concerns about declining demand for high-end office space don’t seem to have put a damper on two other large Glendale projects. The Howard Platz Group is moving forward with plans for a 192,000-square-foot office building at 450 N. Brand Blvd., and the State Teachers Retirement System of Ohio, which has $51 billion in assets, is developing a 17-floor, 380,000-square-foot office project called City Center 2. “We are still very optimistic about the Tri-Cities market,” said Jonathan Rolwing, senior acquisitions officer for the retirement fund. “We acknowledge there’s a bit of a slowdown or plateau, but basically we see it as a healthy market.” Derrill Quaschnick, assistant director of the Glendale Redevelopment Agency, said the City Council was disappointed by Maguire’s decision to shelve the project, but members remain confident the development will be resumed once the market improves. “With the freeway frontage we’re not really worried about what will happen on the site,” said Quaschnick. “It’s a valuable property, and when the time is right something will happen there.”