Pasadena Lease Activity Helps Maintain Healthy Vacancy Rate
By MARGOT CARMICHAEL LESTER
Thanks to leasing activity that gobbled up a large chunk of the available space in Pasadena, the Tri-Cities submarket was able to boast one of the lower vacancy rates in the region.
The overall vacancy rate in the Burbank-Glendale-Pasadena market stood at 12 percent at the end of the January-March period, equal with the prior quarter, and a full 1.5 percent lower than the year earlier, according to Grubb & Ellis Co.
As the market held steady, asking rates for Class-A space inched up two cents, to $2.45 per square foot.
"Landlords feel the recovery is further down the road than they thought," said Hunt Barnett, a principal with Madison Partners. "If a reasonable deal is available now, they feel they'd better take it."
One statistic did change markedly. Tri-Cities net absorption (the amount of space newly occupied minus the amount newly available) moved up to 237,378 square feet in the first quarter from 9,700 square feet at year-end.
Pasadena led the submarket in both absorption and vacancy rates, posting a first quarter vacancy rate of 9.3 percent, second only in L.A. County to the far smaller Carson office market.
The gain was largely attributable to Western Asset Management Co.'s occupancy of 172,000 square feet at Robert Maguire's 270,000-squasre-foot Western Asset Plaza project at 385 E. Colorado Blvd. Though the deal was signed last year, the space wasn't considered off the market until the move-in.
First-quarter vacancies were down from the 11 percent posted in the October-December fourth quarter. Asking rates for Class-A space ticked up by a penny from the earlier quarter, to $2.36 per square foot.
"Large blocks of contiguous space are very difficult to find in Pasadena," said Shaun Stiles, senior vice president of Colliers-Seeley.
That's driving construction, including the IDS Crown City Center project, a 230,000-square-foot office development on Lake Avenue scheduled for completion May 2005.
Space to market
In Burbank, the first quarter was a mixed bag. Vacancy was up to 12.6 percent from 11.7 percent at year-end, yet lower than the 17.6 percent from first quarter of 2003.
"It's a slight blip, but still dramatically better than the 20 percent vacancy of 18 months ago," said Bill Boyd, a senior vice president at Grubb & Ellis.
Asking rates for Class-A space rose six cents to $2.59 per square foot, ahead of the $2.56 posted in the same quarter last year.
The largest lease in the first quarter was the expansion of Deluxe Media Services in a 33,000-square-foot lease in 2400 Empire Ave., a formerly vacant building. The five-year deal is worth more than $4.5 million.
Net absorption in Burbank fell to negative 40,000 square feet in the first quarter from a positive 200,000 in the year-ago quarter.
In Glendale, occupancy continued to soften, with vacancies climbing a full point to 14.6 percent from 13.4 percent in fourth quarter 2003. Nearly 70,000 square feet were put back into circulation, compared to net absorption of 36,713 square feet in the prior period.
"While Glendale has seen negative net absorption," Stiles noted, "activity is picking up due to aggressive deals being offered by landlords and sub-landlords."
Deal-making kept average asking rates practically constant for Class-A, where rates grew nominally to $2.43 per foot per month from $2.41 in the fourth quarter.
"Concessions are reminiscent of the old days of 20 percent vacancy," Boyd said.
Tom Bohlinger, senior vice president for CB Richard Ellis, said Tri-Cities faced competition on the investment front from other submarkets, such as the Westside.
After a flurry of activity in the fourth quarter, deal flow slowed in the first quarter.
Barnett said the current climate is likely to stay for a time. "Landlords and tenants haven't done much this year," he said. "They look at the economy and the world situation and see it's still a mess."
-Pasadena's Koll Center, 1055 E. Colorado Blvd., saw three deals: HealthNet took 18,000 square feet, GMAC Mortgage took 15,000 square feet and Regent Executive Suites took about 12,000 square feet, all at around $2.25 per square foot.
-Bank of America renewed approximately 25,000 square feet at 55 S. Lake Ave. in Pasadena for an undisclosed sum.
-Deluxe Media Services took a 33,000-square-foot lease at 2400 Empire Ave. in Burbank, in a five-year deal worth more than $4.5 million.
-Azteca America leased the 18,000-square-foot building at 1139 Central Ave. in a 10-year deal at an undisclosed rate.
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