Led by red-hot Pasadena and an improving Burbank, the Tri-Cities office market tightened in the third quarter even as the sluggish Glendale submarket continued to lag.
The overall vacancy rate fell to 9.4 percent, more than a point lower than the previous three months, with Pasadena recording a 5.6 percent rate, third lowest of all county submarkets, according to Grubb & Ellis Co.
Burbank saw its vacancy rate drop to 8.4 percent, almost three points lower than the first quarter, while Glendale's rate remained high at 14.4 percent.
Brokers attributed Pasadena's strong performance to its attractive retail and housing markets, as well as its accessibility. It also has become a center for high-tech businesses.
"(It's) the location of choice for many companies in search of space in the Tri-Cities," said Doug Marlow, executive vice president with CB Richard Ellis.
With the market tight already, just 33,800 square feet of space was taken off Pasadena's inventory in the second quarter, compared with the 91,500 square feet absorbed in the prior three months.
This has helped push up asking rents for Class A office space one penny, to $2.53. "Look for explosive growth as technology firms like Yahoo move into the content business," Marlow said. "Health care and engineering also have performed well recently."
Growth is expected to propel the lease-up of Crown City Center, a 233,600-square-foot Class A office building at 203 N. Lake St., which is scheduled to come online later this year.
Among the more significant deals in the quarter, Micron Technologies Inc. leased 20,700 square feet at 251 S. Lake Ave. and First Quadrant LP renewed its lease with for 22,600 square feet in Tower 1 at Pasadena Towers, 800 E Colorado Blvd. Terms were not disclosed for either lease.
Meanwhile, Burbank put in a strong performance, with the submarket seeing more deals than either of its two sister cities, absorbing 306,000 square feet of space. But with 305,000 square feet under construction, asking rents inched up two cents to $2.65.
Especially hot is the market surrounding Bob Hope Airport, which had been performing poorly.
"The rebound of this market is one of the primary reasons Burbank's vacancy has dropped," Marlow said.
Leading the way was IDT Entertainment Inc., which leased 87,500 square feet at Burbank Airport Plaza. Deluxe Digital Studios Inc., which has 65,200 square feet at the Burbank Empire Center, took an additional 13,500 square feet of space in a deal valued at $3-million.
The sales market also remained strong with a number of notable deals. BlackRock Realty Advisors Inc. acquired the 32-story Tower Burbank at 3900 W. Alameda Ave. for $157 million from Tishman Speyer Properties. The 493,800-square-foot property was 95 percent leased at time of sale.
Behringer Harvard REIT I bought the 115,000-square-foot, seven-story Buena Vista Plaza building at 2411 W. Olive Ave. for $32.9 million from Ryanco Partners Ltd. Finally, Versailles Properties LP purchased the four-story, 54,900-square-foot building at 4100 W. Alameda Ave. for $15 million from the Toluca Lake Corporate Center Inc.
Meanwhile, the lagging Glendale market continued its slow pace. Vacancy rates crept down less than half a point and Class A rents remained stable at $2.43, but Class B rents plummeted to $1.99 from $2.16.
Bill Boyd, managing director and executive vice president of Grubb & Ellis, says the drop also is an indication of rent erosion, which starts in second-tier buildings.
In the city's lone significant lease deal, the California State Compensation Insurance Fund took an additional 22,300 square feet at Glendale Plaza, 655 N. Brand Blvd., bringing its total footprint to 171,100 square feet. Terms were not disclosed. There was only one recorded sale. TWS Realty Inc. purchased 600 N. Brand Blvd. for $21 million from Reading International. Two other buildings, 101 N. Brand Blvd. and 505 N. Brand Blvd. are still on the market.
& #8226; Deluxe Digital Studios Inc., which has 65,200 square feet at the Burbank Empire Center, leased an additional 13,500 square feet of space.
& #8226; BlackRock Realty Advisors Inc. acquired the 32-story Tower Burbank at 3900 W. Alameda Ave. in Burbank for $157 million.
& #8226; Behringer Harvard REIT I bought the 115,000-square-foot, seven-story Buena Vista Plaza building at 2411 W. Olive Ave. in Burbank for $32.9 million from Ryanco Partners Ltd.
& #8226; TWS Realty Inc. purchased 600 N. Brand Blvd. in Glendale for $21 million from Reading International.
& #8226; Micron Technologies Inc. leased 20,700 square feet in Pasadena for undisclosed terms.
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