Flurry of Lease Deals Gives Boost to Lackluster Market
By SAMANTHA LEE
A number of leases signed at the end of the second quarter in Burbank and Pasadena helped breathe life into the Tri-Cities commercial real estate market, which has been sluggish for the last two quarters.
The deals helped push the Tri-Cities' net absorption rate to 217,941 square feet, compared with 62,007 square feet in the previous three months, according to Grubb & Ellis Co.
"The Tri-Cities area had a great second quarter, with a number of significant leases being signed at the end of the quarter," said R. Todd Doney, executive managing director at Insignia/ESG.
The Tri-Cities is made up of Glendale, Pasadena and Burbank. The vacancy rate for the area as a whole rose to 14 percent, up from 12.5 percent in the first quarter. Comparatively, vacancies were at 11.7 percent in the second quarter of 2001.
Among the deals completed in the second quarter included Warner Music's 17-year lease of 194,000 square feet at The Pinnacle at 3300 W. Olive Ave. in Burbank for $120 million. NBC leased 18,000 square feet in the same development in a 12-year deal worth $8.4 million.
Liberty Livewire renewed its current lease for 97,311 square feet and leased an additional 18,689 square feet at 2901 West Alameda Avenue in Burbank from Douglas Emmett Realty Advisors. The lease was signed for 15 years and valued at $40 million.
Overall, Burbank's Class A asking rents averaged $2.63 in the second quarter, barely changed from $2.62 in the January-March period.
In Glendale, things were quieter. "There is very little tenant activity in the Glendale office market," said Bill Boyd, senior vice president at Grubb & Ellis. The vacancy rate remained nearly flat, at 12.9 percent, from 12.8 percent in the first quarter, but down from 14.5 percent for the same period a year ago.
"The Glendale market still remains distracted by subleased space that has come on the market in the second quarter," Boyd said.
Over 100,000 square feet of subleased space came on the market in the second quarter at 500 N. Grand, and 40,000 square feet at 550 N. Grand. Boyd said asking rents at those addresses average $1.50-$1.75 per square foot. Comparatively Glendale's average second quarter rent was $2.43, down from $2.50 in the first quarter. "There's not much more owners (in that space) can do," said Boyd. "They are already quoting rents that have not been so low since 1978."
Metropolitan Life Insurance leased 8,600 square feet for five years from Lend Lease Real Estate Investments at the 550 N. Grand property. The deal was valued at $1.3 million.
A rise in the number of phone calls, tours and proposals of prospective properties show that activity is increasing in Pasadena, said Shaun Stiles, a senior vice president at Colliers Seeley International.
"A lot of tenants are out there looking at space, which will hopefully lead to deals being signed," he said.
The vacancy rate in Pasadena is 10.7 percent, down from 11.3 percent last quarter. Rents are $2.39 per square foot, down from $2.45 last quarter.
The biggest second-quarter deal in Pasadena was a 70,000-square-foot lease by Tetra Tech at 3485 Foothill Blvd. from Kearney Real Estate Co. It was valued at $25 million for 12 years.
Kaiser Permanente leased ground floor space in Pasadena from Koll Development. The five-year deal was signed for 8,400 square feet at 1055 E. Colorado, valued at $1.15 million. "The location is significant in that ground floor spaces are traditionally rented to banks, restaurants or retail businesses," said Brendan Monaghan, senior associate at Grubb & Ellis, which brokered the deal for Kaiser's ophthalmology group. Over 5,000 square feet of ground floor space was leased to the California School of Culinary Arts at 150 Los Robles by the Shidler Group. The five-year deal is worth $1 million.
More space is expected to come on line in Pasadena in the next several months. Champion Development has broke ground on the Pasadena Collection, a $40 million 75,000 square foot mixed-use development at the corner of Cordova and Lake Avenues. Slated for completion in second quarter 2003, the property will have 52,000 square feet of Class A office space and 18,000 square feet of retail. The residential complex, which will include 72 apartments, will be completed by the third quarter of 2003.
"Big deals are being made, which points to increased activity and vacancies going down," Stiles said about the Tri-Cities area in general.
- Warner Music signed a 17-year lease for 194,000 square feet at The Pinnacle at 3300 W. Olive Avenue in Burbank. The lease is valued at $120 million. NBC leased 18,000 square feet worth $8.4 million at the same site.
- Tetra Tech leased 70,000 square feet of space at 3485 Foothill Blvd. in Pasadena for 12 years for $25 million.
- Metropolitan Life Insurance leased 8600 square feet at 550 N. Grand in Glendale for $1.3 million for 5 years.
- Champion Development broke new ground on the Pasadena Collection, a $40 million 75,000 square foot mixed-use development on the corner of Cordova and Lake avenues.
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