Don't shed many tears for Burbank.
Though NBC Studios may be packing up and leaving its location near "beautiful downtown Burbank" for nearby Universal City, Burbank has the hottest office market in the county and will likely weather the departure of one of its signature tenants.
Far from being the drab run-down locale that became the frequent butt of former "Tonight Show" host Johnny Carson's sarcastic jokes, the downtown and nearby office Media District has been transformed over the last 20 years.
Downtown Burbank is bustling with new stores, restaurants and expensive condominiums, while the Media District near the Ventura (134) Freeway has gleaming office towers filled with tenants. Media and entertainment companies have flocked to the area, anchored by Walt Disney Co., Warner Bros., and until 2011 NBC.
"That location of NBC in the Media District is ground zero for popularity and proximity," said Bill Boyd, executive vice president at Grubb & Ellis and managing director of the firm's Los Angeles metropolitan region. "It has historically been the most preferred location and only when space is not available (in the general area) have media tenants gone to the adjacent cities to satisfy their office requirements."
NBC Universal and its corporate parent, General Electric Co., announced last week that it will sell much of its Burbank studio campus and, starting in 2011, relocate its studio operations to a site just outside Universal City, home of Universal Studios and CityWalk.
The new high-definition studio will house NBC News' West Coast operations and the news staffs of KNBC, KVEA-Channel 52 as well as the syndicated show "Access Hollywood." The new studio will be part of NBC Universal's massive, $3 billion proposed expansion of the Universal Studios campus, which includes residential units, stores and additional office space.
John Tronson, a principal in the Hollywood office of Ramsey-Shilling Commercial Real Estate Services Inc., said that while the move was a shock to the brokerage community, the new gaping hole in the Burbank market will likely be filled easily.
Indeed, the Class A ("prime") office vacancy rate in the city during the third quarter was 3.4 percent, according to Grubb & Ellis Co. That's the lowest in all of L.A. County and less than half the vacancy rates in nearby Glendale or in Los Angeles. Moreover, the vacancy rate in the Media District is estimated at less than 3 percent by local brokers.
But there's an even bigger attraction for the 34-acre NBC property. Thanks to advance planning by NBC and General Electric a decade ago, the property is fully entitled for up to 1.1 million square feet of office development for media and entertainment industry-related uses, double the square-footage in the current studio campus.
A fully entitled site this size is a rarity and makes the property even more attractive to developers.
"It is so much more desirable to have a property with entitlements," said R. Todd Doney, a vice chairman with CB Richard Ellis Group Inc. "You don't have to go through the environmental impact report process and put forward all sorts of mitigations, which could take years and cost millions of dollars up-front."
Doney should know: two years ago he brokered the sale of nine acres of the NBC site to Santa Monica-based M. David Paul Development LLC, which is now in construction on a 14-story office tower on the site a building going up on spec without being pre-leased to tenants.
All Paul Development had to do was to submit a design plan to the city and pull a building permit. Doney added that while he was serving as a broker on the deal, he knew of at least 20 parties that had expressed interest in the nine-acre site.
The fact that the building is going up on spec shows a vote of confidence in the local market. And Burbank officials say that as long as a prospective developer adheres to the site's master plan, the proposal should get quick approval from the city.
"When we reviewed NBC's master plan 10 years ago, we did all the traffic studies and we anticipated the development and what the streets would allow in terms of capacity," said Joy Forbes, a deputy city planner.
However, should a developer decide to do a mixed-use project with a residential component, that could pose challenges, requiring the developer to go through the whole planning process again, including seeking City Council approval, she said.
That can be a tricky, time-consuming process, as the developer of a proposed nearby mixed-use project just down the street from NBC Studios found out several years ago.
The original plans by Platt Cos. for the site between Olive and Alameda avenues were rejected as being too massive after complaints from nearby residents. The developer eventually whittled the project down to 220 residential units and 20,000 square feet of restaurant and retail space and the project was approved in late 2004. But by then, Platt's financing had run out, and now the project's fate rests with its lenders.
Given this, it's far more likely that a developer for the NBC site will stick to office or media production space.
Indeed, it's even possible that the site will remain an active studio, though the city might prefer a total redevelopment of the property, since it contains a motley collection of aging buildings. However, there's been strong demand for studio space, highlighted by the $150 million acquisition in June of Manhattan Beach Studios by Carlyle Group, the Washington. D.C.-based private equity firm.
"It could take any number of different, very profitable directions," said Ramsey-Shilling's Tronson. "Independent studios have been the darlings of large private funds that have bought them over the years. It may well just remain a studio and be sold to one of the other guys that are buying studios."
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