The first quarter was not kind to the Tri-Cities, with the Pasadena, Glendale and Burbank office markets all experiencing negative net absorption. But Burbank took the worst hit: nearly 475,000 square feet came back on the market when Walt Disney Co. vacated its longtime occupancy at the 32-story Alameda Tower, shooting the city’s vacancy rate up more than six points.
Burbank had a “respectable” 13.9 percent vacancy rate at the end of 2012, said William R. Boyd Jr., senior managing director at Charles Dunn Co. But by the end of first quarter 2013, it had risen to 20.2 percent, a number he called “disastrous. That’s beyond description; it’s the highest vacancy rate Burbank has ever experienced.”
Most of the damage was due to Disney vacating close to 500,000 square feet at the office tower at 3900 Alameda Ave. The building is now essentially vacant and New York property owner BlackRock Inc. is reportedly considering selling it. Disney employees were moved to a collection of company-owned properties in the first quarter, including its Grand Central Creative Campus at Flower Street and Grandview Avenue in Glendale.
Another blow to the market was announced, but has yet to be felt. NBC’s “The Tonight Show” will move to New York in 2014. The move itself will be mostly symbolic, since the production shoots in Burbank but does not occupy office space there. But it will affect local companies that serve the show, Boyd said. He predicted it would take the market 18 to 24 months to get back to the 82,000 square feet of positive net absorption Burbank saw in fourth quarter 2012.
Media and technology trends favoring Internet-based entertainment are causing a sea change at the major studios that have traditionally resided in Burbank, and many of them are downsizing as a result. NBCUniversal cut about 500 employees, about 1.5 percent of its workforce, in late 2012. DreamWorks SKG has announced 350 job cuts and Disney this month announced 150 layoffs at its movie studios.
Data from Jones Lang LaSalle Inc. show the vacancy rate for the Tri-Cities market at 18.4 percent, up two-and-a-half points from the fourth quarter and back to exactly where it was one year ago. Vacancy rates in Glendale and Pasadena both inched up by less than a point quarter over quarter.
Average rental rates in the Tri-Cities have been relatively flat for the past two years, but market pressure might force them down with so much vacant space.
– Karen E. Klein
Main Events
*The Pasadena headquarters of Avery Dennison Corp., a label and packaging maker, was sold to Foster City investment firm Legacy Partners for about $20 million. The 98,000-square-foot, three-story office building at 150 N. Orange Grove Blvd. and an adjacent property will be converted into a creative office campus. Avery Dennison is reportedly negotiating for about 40,000 square feet at 55 S. Lake Ave. in Pasadena with landlord Beacon Capital Partners.
*The Foothill Center, a six-property business park at 2832 E. Foothill Blvd. in Pasadena, sold for $8.7 million to a family trust in a cash transaction. The property houses a mix of professional tenants.
*The 11-story, 23,000-square-foot AT&T building at 177 Colorado Blvd. in Pasadena is reportedly for sale. The property occupies a full city block and is adjacent to the busy Old Pasadena shopping and dining district.
*Bank of America vacated 45,000 square feet of space on four floors at 611 N. Brand Blvd. in Glendale. The move-out came after 281 employees were laid off in late 2012. The building was foreclosed on in March and is planned to be listed for sale.
*Technology firm DevExpress leased 10,581 square feet in a full-floor relocation to LaSalle Investments’ Glendale building at 505 N. Brand Blvd.
