Bulldozers went to work in Pasadena duing the first quarter and a major new office building hit the market in Glendale.
But two big projects ran into problems in Burbank the biggest one being Vestar Development Co.'s plans to develop 985,000 square feet of retail and office space on a 102-acre parcel owned by Lockheed Martin Corp. The deal fell apart when Phoenix-based Vestar failed to close escrow on the land by a Dec. 31 deadline, and Lockheed reopened the bidding.
Earlier this month, Lockheed signed a contract to sell the site to Los Angeles-based developer Zelman Cos., which plans to build a $100 million retail, office and auto complex.
"The development of the site will still be substantial," said Paul Krueger, economic development manager for Burbank. "There will be about 585,000 square feet of retail, two hotels with 350 rooms, and 600,000 square feet of office. The remaining 29 acres will go for automotive retailing."
The purchase price of the property was not disclosed. But Krueger said Vestar had been prepared to pay about $60 million for the land, and Zelman is reportedly willing to beat that price. Escrow is expected to close in the fourth quarter.
Meanwhile, problems continued for a major project in Burbank's downtown media district.
Sources said Equity Office Properties has retained Cushman Realty Corp. to explore alternatives for its dormant five-acre property, including possible sale of the site bordered by Olive Avenue, California Street and the Ventura (134) Freeway.
It was the latest move in a year-long struggle between Equity and its development partner, J.H. Snyder Co., over construction of a 585,000-square-foot office complex called Media Center.
Neither Equity nor Snyder have been willing to discuss the project since Snyder filed a lawsuit against its financial partners in January claiming breach of contract. Snyder is seeking $7.2 million for losses allegedly suffered because of construction delays.
"I think it's fair to say that we're very disappointed that we're not under construction on the project right now," said Cliff Goldstein, a partner at J.H. Snyder.
The troubles encountered by the two projects came as Burbank posted an office vacancy rate of 5.1 percent in the first quarter the lowest of any submarket in L.A. County, according to Cushman and Wakefield Inc.
In Glendale, meanwhile, the office vacancy rate soared to 16 percent in the first quarter, up from 10.8 percent a year earlier. The increase came as the largest new office tower to be built in L.A. County since the early 1990s opened for occupancy at 655 N. Central Ave.
After a year-long marketing effort, the 24-story, 500,000-square-foot Glendale Plaza landed its first lease as State Compensation Insurance Fund agreed to take 125,000 square feet in a long-term deal worth an estimated $35 million.
The building later gained another tenant when Regus Business Centres Corp. leased 33,000 square feet. The deals put Glendale Plaza on track to meet its target of being 50 percent full by summer, according to Bill Boyd, a senior vice president at Grubb & Ellis Co.
"It's encouraging that the building is leasing consistent with the other major buildings developed (in Glendale) over the past 10 years, in that all those other buildings were 20 to 40 percent leased by the time they finished completion," Boyd said.
But Boyd predicted that the addition of Glendale Plaza, combined with another 175,000-square-foot tower that broke ground in the first quarter at 400 N. Brand Blvd., could soon force down rents that have trended upward in the city for the past few quarters.
"I think right now, we'll see the stabilization of rents," Boyd said. "But in the third and certainly fourth quarter, we'll see the rents start to deflate. Usually it's a six-month lag before the market starts to adjust (to an oversupply of space)."
While the addition of new space sent the vacancy rate soaring in Glendale, a lack of new space in neighboring Pasadena caused that city's rate to edge downward to 9.6 percent in the first quarter, from 11.2 percent in the fourth quarter of 1998, according to Cushman & Wakefield.
The low vacancy rate made Pasadena one of L.A. County's top-performing submarkets and was a major force behind the start of two major new office projects in the past three months.
In one of those projects, Koll Development Co. finished bulldozing a parcel of land at 1055 E. Colorado Blvd., and expects to start construction of a 176,000-square-foot office building in the next few weeks, said Gary Toeller, a partner and senior vice president for Koll. The project should be completed in about a year, and will offer 44,000-square-foot floor plates the largest in Pasadena, he said.
"We're the first building to come out in nine years on Colorado Boulevard," Toeller said. "These floor plates are designed for the tenant who loves efficiencies. The largest floor plate available in all Pasadena now is 22,000 square feet."
Also in Pasadena, a multimillion-dollar renovation and expansion got underway on two adjacent buildings at 250 N. Halstead St. and 300 Foothill Blvd., said Todd Doney, a senior vice president at Cushman Realty Corp.
Upon completion at the site, the new Pasadena Corporate Park, owned by Morgan Stanley Real Estate Funds, will add about 254,000 square feet of office space to the market.
"It'll be done in the first or second quarter of 2000," Doney said.
? In Burbank, Zelman Cos. emerged as the new buyer of a 102-acre parcel near Burbank Airport and plans 585,000 square feet of retail, two hotels and 600,000 square feet of office space. The remaining 29 acres will go for automotive retailing.
? Glendale Plaza, the largest new office tower to be built in L.A. County since the early 1990s, opened for occupancy. The 24-story, 500,000-square-foot development landed its first lease, as State Compensation Insurance Fund took 125,000 square feet in a deal worth an estimated $35 million.
? In Pasadena, Koll Development Co. finished clearing a parcel of land at 1055 E. Colorado Blvd. for construction of a 176,000-square-foot office building.
? A multimillion-dollar renovation and expansion got underway on two adjacent buildings at 250 N. Halstead St. and 300 Foothill Blvd. as part of Pasadena Corporate Park, which will add about 254,000 square feet of office space to the market.
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