Strong demand for commercial property in Pasadena led the way for the Tri-Cities region in the first quarter, despite another lackluster performance by struggling Glendale.

Pasadena’s 6.1 percent vacancy rate for office space was the lowest in the county, pushing up Class-A average asking rents in the region to $2.51 a square foot, up from $2.48 at the end of last year.

Asking rents in the three cities, which also includes Burbank, have now been on the rise for the past two years, while vacancy rates declined to 10.5 percent from 12 percent, according to Grubb & Ellis Co.

“The submarket was much more homogenous 10 years ago,” said Bill Boyd, managing director and executive vice president at Grubb & Ellis. “The three respective cities are currently going in three different directions.”

Pasadena has enjoyed a vacancy rate below 12 percent for eight quarters, moving into single-digit territory a year ago.

Slim vacancy propelled average asking rates upward over the same period.

The tight market has kept deals at a minimum. The most notable lease was on South Raymond Avenue where Children’s Place Retail Stores Inc. relocated from Glendale. Terms were unavailable for the 13-year, 70,000-square-foot lease.

Strong demand also continued to take office space off the market, with net absorption positive in Pasadena for the fifth consecutive quarter at 91,447 square feet.

Burbank thriving


Burbank continued to thrive as well because of sustained growth of entertainment-related companies.

It also appeals to tenants who favor easy access to the airport and to workers living in the Santa Clarita Valley to the north and San Fernando Valley to the west.

The city’s vacancy rate slipped to 11.1 percent in the January-March period from 12.9 percent at the end of last year. As a result, Burbank actually led the submarket in Class-A average asking rents, which rose to $2.63 per square foot in the quarter, up from $2.60 at the end of last year.

Demand is evidenced by the successful lease-up of phase one of the $44-million, 480,000-square-foot Burbank Airport Commerce Center. Voit Development Co. has begun construction of phase two, which will includes condominiums and industrial buildings.

“As a highly attractive submarket that offers a number of larger, contiguous spaces, and new premier product coming on the market in the next year, Burbank should see positive activity on the leasing front,” said Andy Feola, a director with Cushman & Wakefield.

Glendale trouble


Glendale, which has already seen several large tenants leave its downtown, took another hit in the first quarter with Nestle USA’s decision to put about 95,000 square feet of its headquarters space at 800 N. Brand Blvd. on the market.

“Glendale was the worst performing market due to an exorbitant amount of space plaguing the market,” Feola said. “There are numerous blocks of contiguous space available caused by minimal leasing activity and recent consolidations, resulting in the highest overall vacancy in the Tri-Cities.”

First-quarter vacancy rates topped out at 14.8 percent, up from 13.1 percent in the October-December period last year. That put 125,853 square feet of space back on the market in the first quarter, while the prior quarter saw just 3,336 feet of net absorption.

“This is particularly troubling in light of Glendale’s underwhelming performance last year,” Boyd said.

Despite that, most landlords have refused to slash rates to attract tenants. Average asking rates for Class-A space were $2.43 for the first quarter, the same as 12 months ago.

But the underperforming market spelled opportunity for some. Maguire Properties Inc. picked up three buildings in the city when it purchased CommonWealth Partners’ portfolio. Maguire got 801 N. Brand Blvd., 700 N. Central Ave. and 200 Burchett St. as part of the $1.51 billion deal. The firm quickly put these buildings and its Glendale Center property at 611 N. Brand Blvd. on the market.

“The amenities that made Glendale so successful in the 1980s and 1990s freeway access, no business license tax, no gross receipts tax, no parking or utility taxes, ample retail amenities and restaurants, central location and access to labor and office buildings that are still some of the best within Los Angeles County today still exist,” Boyd said.

But that is being overshadowed by several factors, including the possibility the Glendale Redevelopment Agency may institute a business license tax, he said.