By DOUGLAS YOUNG
First it was Burbank, then Glendale. Now it appears that Pasadena the longtime under-performer of the Tri-Cities is poised to become L.A. County's hot new market for office real estate.
Pasadena has long lagged the other two cities in office occupancy rates and continued to do so in the third quarter, with a vacancy rate of 10.9 percent, compared with 5.9 percent for Burbank and 6.5 percent for Glendale, according to Grubb & Ellis Co.
But while analysts say that vacancy rates in Burbank and Glendale have largely bottomed out and fluctuate quarter to quarter based on the occasional new lease or tenant departure Pasadena's rate has fallen steadily since the first quarter and could move into the single digits by year-end.
Several projects in the Tri-Cities market moved forward in the third quarter, driven by a third-quarter vacancy rate of 8.6 percent, largely unchanged from an already low 8.7 percent rate in the second quarter and the lowest for any submarket in L.A. County.
Pasadena was the most active of the Tri-Cities submarkets during the quarter, scoring a major new lease and the announcement of a new office project by Koll Development, said Todd Doney, a vice president at Cushman Realty Corp.
The lease deal the biggest for an existing Tri-Cities building during the third quarter involved EarthLink Networks Inc., which took another 55,000 square feet at its existing headquarters.
Koll, meanwhile, announced it purchased a 1.9-acre site at 1021 E. Colorado Blvd. and plans to build a five-story, 171,000-square-foot office building there. Koll expects to start construction in the first quarter of 1999, said Bill Boyd, a senior vice president at Grubb & Ellis.
"I think the hook is that in 1997, Pasadena absorbed 400,000 net square feet, compared to Burbank and Glendale which, combined, absorbed less than 125,000," Boyd said. "So the activity in Pasadena is quite dramatic, and it will certainly be single-digit vacancy by the end of this year."
Also in Pasadena, Champion Development Group announced plans to build a hotel/retail complex on South Lake Avenue, said Boyd. And Tokyo Tatemo put the 200,000-square-foot building it owns at 2 N. Lake Ave. on the market, while the sale of two other office buildings in Pasadena is near completion, Doney said.
In Glendale and Burbank, meanwhile, tenants were showing a preference for space in moderately priced new buildings.
M. David Paul and Associates signed two major leases for its new 215,000-square-foot building nearing completion at 2550 Ontario St. in north Burbank, said Paul Krueger, economic development manager for the city of Burbank. A Texaco joint venture took 65,000 square feet in the building, while Microcaddam, a subsidiary of IBM, took 20,000 square feet in the other.
Meanwhile, two larger and pricier projects have yet to announce a single pre-leasing commitment, Boyd said. One of those is Glendale Plaza, which is under construction by PacTen Partners at 655 N. Central Ave. in Glendale. The other, which has yet to break ground, is being developed by J.H. Snyder Co. on land bound by Olive Avenue, California Street and the Ventura (134) Freeway in Burbank.
The lack of interest in the two projects both seeking pricey rents well above the $30-per-square-foot-per-year-mark may be related to the recent withdrawal of entertainment tenants from the market, according to Boyd.
"Entertainment historically has paid the highest rents in the market," he said.
The demand for more moderately priced space pushed along three other pending developments in Burbank.
In one, Vestar Development Co. was on the fast track to develop about 580,000 square feet of retail space on a 102-acre parcel it owns near Burbank Airport. The project is still in the approval process, but Vestar has said it would like to have initial space ready for occupancy in time for the 1999 Christmas season, Krueger said.
On the same parcel, Kilroy Realty Corp. plans to develop between 400,000 and 750,000 square feet of moderate-rent office space, said Andy Fishburn, the firm's senior vice president of leasing.
"We are very excited. It's a great site," he said. "It's basically a low-rise office campus with a lot of open space, surface parking and possibly structure parking. I think the intent would be to kick off with about 150,000 square feet, with the balance phased. We'd look to break ground in January. We'd love to have something open by the end of 1999 or the first quarter of 2000."
In the third moderately priced project, Regent Properties moved closer to agreeing with the city of Burbank on a plan to develop about 180,000 square feet of office space, 80,000 square feet of retail and a 200-room hotel at the former Burbank police station on Third Street and Olive Avenue, according to Krueger.
"This activity with the market being sensitive to price bodes well for the Regent Properties planned development," Boyd said.
? EarthLink Networks Inc. leased 55,000 square feet at 2947 Bradley St. in Pasadena.
? Koll Development purchased a 1.9-acre site at 1021 E. Colorado Blvd. in Pasadena and plans to build a five-story, 171,000-square-foot office building.
? M. David Paul and Associates signed two major leases for its new 215,000-square-foot building nearing completion at 2550 Ontario St. in Burbank.
? Champion Development Group announced plans to build a hotel/retail complex on South Lake Avenue in Pasadena.
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