The Tri-Cities office market experienced an unusual reversal during the second quarter, with long-struggling Glendale experiencing a dramatic drop in its vacancy rate while once-smoking Burbank and Pasadena suffered a net loss in tenancy.

The overall Tri-Cities market posted a vacancy rate of 8.5 percent during the second quarter, improved from 9.6 percent during the first quarter, according to Grubb & Ellis Co.

That decline is thanks entirely to all the activity in Glendale, where the office vacancy rate dropped all the way from 16.2 percent in the first quarter to 11.7 percent in the second. Net absorption (the amount of space occupied minus the amount vacated) during the most recent quarter was 306,716 square feet in that city.

Burbank, meanwhile, experienced negative absorption of 49,424 square feet, as its vacancy rate rose from 5.8 percent in the first quarter to 7.3 percent. And Pasadena saw negative absorption of 47,239 square feet, with its vacancy rate rising to 6.1 percent from 5.3 percent in the first quarter.

Several deals gave the Glendale office market a badly needed boost. The 533,000-square-foot Glendale Plaza, a high-rise office tower owned by PacTen Partners that has struggled to attract tenants since opening in April 1999, is now 99 percent leased. State Farm Insurance leased an additional floor at the building. Meanwhile, Portland, Maine-based insurance company Unum/Provident Corp., which had leased 67,000 square feet at the tower last quarter, expanded its agreement to include an additional two floors for a total of 112,000 square feet of space, and Hispanic Broadcasting Corp. leased 45,000 square feet in Glendale Plaza.

Other major leases in Glendale during the quarter included a deal by IHOP Corp. for 67,000 square feet at 450 N. Brand Blvd., bringing that building's occupancy rate to 95 percent.

Meanwhile, Shuwa Corp. sold its property at 505 N. Brand Blvd. to CB Realty Advisors for an undisclosed price.

Senior Vice President Doug Marlow with CB Richard Ellis projects a steady rise in rental rates in each of the Tri-Cities due to a renewed resistance to property development in the region. Glendale, formerly a pro-growth city, now has a City Council with a majority of slow-growth members, which is expected to further choke supply. "That basically leaves Burbank (as a site for future development)," Marlow said.

Despite a rise in Burbank's office vacancy rate during the second quarter, overall market conditions in that city remain tight. With about 3.7 million square feet available, the city has less rentable space than either Pasadena or Glendale.

"The smaller the market, the more dramatic the increase (in the vacancy rate when a few tenants move out)," said Regina Burke, research director with Grubb & Ellis. "Anything that happens really shows up in those lower numbers."

Construction continued on two massive Burbank developments: the mixed-use Burbank Empire Center, at the former Lockheed Martin Corp. site bounded by Buena Vista Street, Empire Avenue, and at M. David Paul & Associates' Media Studios North office campus project.

Like Burbank, Pasadena experienced a jump in its office vacancy rate after a slew of smaller spaces came on the market, according to Burke. But its 6.1 percent vacancy rate is still much improved from the 9.0 percent level of a year ago, and there is still plenty of activity.

The biggest Pasadena lease deal of the quarter was signed by IndyMac Bancorp Inc., a technology-based mortgage banking firm. In a 10-year deal valued at $38 million, the company agreed to occupy 141,800 square feet in the first phase of Kearny Real Estate Co.'s Pasadena Corporate Park. IndyMac is scheduled to move into its new location when the project is completed in early 2001.

Pasadena Corporate Park, located at Foothill Boulevard and Halstead Street, is a 250,000-square-foot, two-phase development on 8.12 acres.

Elsewhere in Pasadena, biotechnology firm Paracel pre-leased 80,000 square feet at a project currently under construction at 1055 E. Colorado Blvd.

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