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.
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