Buyers Continue to Splurge but Demand for New Leases Slows

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Buyers Continue to Splurge but Demand for New Leases Slows

By MARGOT CARMICHAEL LESTER

Contributing Reporter

Low interest rates and high occupancy levels continued to spur investment activity in the Tri-Cities during the third quarter. However, the leasing market remained in the doldrums.

“What little leasing was done in the sub-market was primarily existing tenants changing buildings and growing slightly,” said Bill Boyd, senior vice president with Grubb & Ellis Co. “We’re not seeing the in-migration we’ve seen in the past.”

That was enough to nudge vacancy rates lower in the area, which encompasses Burbank, Glendale and Pasadena. Vacancies fell to 12.7 percent in the July-September period from 13.2 percent in the second quarter and 14.8 percent in the like year-ago period.

Third quarter net absorption (the amount of space newly occupied less the amount newly available) was 100,000 square feet, up from 29,640 square feet in the second quarter.

The investment market was strong.

In Glendale, Cornerstone Real Estate Advisors Inc. bought 325,000-square-foot 330 N. Brand Blvd. from Teachers Insurance and Annuity Association-College Retirement Equities Fund. The 90 percent-leased building traded for about $61 million, or $188 a foot.

Elsewhere in Glendale, Maguire Properties Inc. acquired the interests of Bank of America and Walt Disney Co. from a partnership of Commonwealth Partners and California Public Employees Retirement System for about $200 a foot. California National Bank sold the former Fidelity Federal Bank corporate headquarters at 4565 Colorado Blvd. to Choong Hyun Mission Church. The 132,000-square-foot building sold for $10.5 million.

Other deals in the submarket included Wells Real Estate Investment Trust Inc.’s purchase of the 176,000-square-foot Koll Center at 1055 E. Colorado Blvd. in Pasadena from Koll Development Co. Wells paid $38 million for the property, which is 80 percent occupied.

Vivendi Universal sold 10 Universal City Plaza for about $190 million to a partnership of Beacon Capital Partners LLC and CarrAmerica Realty Corp. Vivendi will lease back about half the 775,00-square-foot building, which is about 19 percent vacant, for about $2.75 a foot.

Busy Burbank

In the third quarter, rental rates for Class-A space fell to $2.43 in the Tri-Cities from $2.45 in the second quarter.

Burbank was the most active territory in the Tri-Cities submarket, as its vacancy rate fell to 14.1 percent in the third quarter from 16.6 percent in the previous three months and 21.4 percent a year ago.

Even there, landlords have lowered rents and taken other measures to market themselves to prospective tenants.

At the Burbank Technology Center, the 390,000-square-foot project adjacent to the Burbank-Glendale-Pasadena Airport, the space has been broken up into smaller 5,000- and 10,000-square-foot spaces.

“They’re getting much more aggressive on rents there,” said Todd Doney, a broker with CB Richard Ellis. “At some point they will get some leasing done.”

Leading Burbank deals was the Warner Bros. lease for the entire Studio Plaza building at 3400 Riverside Drive in a 15-year, 455,266-square-foot-deal worth $250 million, a consolidation that will eventually encompass 2,000 employees.

NBC’s Bravo division leased 19,124 square feet, its take at Phase One of the Pinnacle at 3300 W. Olive Ave. with the 11-year deal for $7 million.

At the Evergreen Building at 4111 Alameda Ave., post-production house Keep Me Posted leased 15,059 square feet for five years at $2.35 per square foot.

Two deals were recorded elsewhere in the submarket. Zurich North America signed a nine-year lease for 48,000 square feet at 801 N. Brand Blvd. in Glendale, consolidating its Pasadena offices and expanding its spaced by 12,000 square feet in the $12.1 million deal.

Pasadena-based Sedgwick Claims Management renewed 8,621 square feet and expanded another 22,468 square feet at 800 E. Colorado Blvd. Terms of the five-year deal were undisclosed.

Major Events:

– Cornerstone Real Estate Advisors bought 330 N. Brand Blvd. from Teachers Insurance and Annuity Association-College Retirement Equities Fund for about $61 million.

– Wells Real Estate Investment Trust purchased 176,000-square-foot Koll Center at 1055 E. Colorado Blvd. in Pasadena from Koll Development Co. for $38 million.

– Warner Bros. leased the entire Studio Plaza building at 3400 Riverside Drive in Burbank in a 15-year, 455,266-square-foot-deal worth $250 million.

– NBC’s Bravo division leased 19,124 square feet, at Phase One of the Pinnacle at 3300 W. Olive Ave. with the 11-year deal for $7 million.

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