By SHELLY GARCIA
With its high rents and low vacancy rates, Burbank's Media District has been dominated by well-heeled entertainment companies that could afford to pay top dollar for location.
But a new round of office development elsewhere in the city will make Burbank more attractive to other kinds of companies, while broadening the city's standing as a business center, real estate brokers say.
Two new projects in the downtown area, and a third near Burbank Airport, are expected to lease for between $2.15 and $2.40 per square foot, compared to $2.50 to $2.75 in the Media District. The lower rents will make these new properties competitive with other parts of the San Fernando Valley.
"The lower-priced space will allow Burbank to compete for tenancies that would otherwise be forced out because of cost," said Douglas Marlow, senior vice president with CB Richard Ellis.
"The (price) difference with the rest of the Valley is closing, and as that continues, it won't just be entertainment that locates there," agreed Jim Lindvall, senior vice president at Grubb & Ellis.
The first of the new projects to come on line will be Media Studios North, a 650,000-square-foot office project under construction by M. David Paul & Associates near Burbank Airport.
So far, the company has leased 70,000 square feet to Equilon Enterprises LLC, a joint venture between Texaco Inc. and Shell Oil Co., and 20,000 square feet to Microcadam Inc., a supplier to the computer-aided design (CAD) market.
"I think we're going to be seeing a diversification," said Paul Krueger, economic development manager for the city of Burbank. "There are several brokers working with non-entertainment-type businesses."
And more office construction is on the way. In September, Regent Properties, a Beverly Hills-based developer, received "conceptual" approval from the Burbank City Council to build Metropolitan Plaza, a mixed-use project that includes 201,000 square feet of office space at the site of the city's old police headquarters on Olive Avenue between San Fernando Boulevard and Third Street in downtown Burbank.
Also in the downtown area, Kilroy Realty Corp. is negotiating with Vestar Development Co. to acquire a 30-acre parcel for a 400,000- to 800,000-square-foot campus-style office development at Buena Vista Street and Empire Avenue.
The Media District is likely to expand as well, with J.H. Snyder Co. proposing a 585,000-square-foot mid-rise complex at 3300 W. Olive Ave.
In addition to the price competitiveness, the new projects are located along freeways that would grant easy access to other parts of the Valley or to downtown L.A.
"It's fundamentally a well-located market," said Lindvall. "Burbank has the opportunity to take business out of the city of L.A. and it has the opportunity to take business out of Pasadena and Glendale."
But some observers are skeptical that all of the new projects will be completed.
"With the entertainment industry slowing down and the financing community topsy turvy, I don't give a project that has to get rents of $30 (a square foot) per year and above much chance," said Larry Kosmont, president of Kosmont & Associates Inc., a real estate and development consulting firm.
J.H. Snyder officials, however, said they see a continued demand for entertainment real estate.
"To say that the entertainment industry is slowing is not the same as (saying) it's shrinking," said Cliff Goldstein, a partner with J.H. Snyder. "They're projecting growth will be down from 5 percent to 2 to 3 percent, but that's still tremendous growth in the industry."
But others speculate that lenders will be reticent to back the plan because a similar, high-end project under construction by PacTen Partners in Glendale has been slow to lease. "I think it's the kiss of death for the Snyder project," said Kosmont.
Most brokers say that since the building boom of the 1980s, developers have become extremely cautious about overbuilding.
"I think there's a system of checks and balances that won't allow all these projects to go," said Nicole Wilson, an associate with CB Richard Ellis. "If the demand warrants, it will get built."
Executives at Kilroy said they have every intention of proceeding with their project. The company is currently in talks to acquire the property from Vestar, and it expects to have construction completed in late 1999 or the first quarter of 2000, said Andy Fishburn, Kilroy's senior vice president for leasing.
Others say that, in the long run, a glut will be only temporary.
"This (office surplus) has happened every seven years since World War II," said Jim Travers, president of Travers Realty Corp. International. "It will have a short-term impact on rental rates and they'll have to give away more tenant improvement dollars. But it's cyclical."
For reprint and licensing requests for this article, CLICK HERE.