After three tough years, the Tri-Cities ended the year with falling vacancies as tenants scooped up empty offices – though Glendale once again was the weak little sister.
Nearly 138,000 square feet of space was taken off the market, driving down the overall vacancy rate nearly a point to 22.4 percent, according to Jones Lang LaSalle Inc.
“We’re finally starting to see absorption, and that’s a nice switch to go from negative to positive,” said Shaun Stiles, executive vice president at Jones Lang LaSalle.
The market’s big driver was Pasadena, where 92,394 square feet were absorbed, and the vacancy rate fell one-and-a-half points to 22.6 percent. Much of the action involved engineering and tech firms, not surprising for a city that is home to the Caltech and companies such as Jacobs Engineering Group Inc. However, one big deal did most of the work: Prepaid debit card firm Green Dot Corp. leased some 140,000 square feet in the city as it aggressively expands.
Burbank, a media market, also saw a resurgence, absorbing 55,322 square feet of space, some 10 times more than the previous quarter. Its vacancy rate fell more than a point to 17.6 percent.
Glendale, which has had the softest market of the Tri-Cities for years, had an especially tough quarter. Struggling Maguire Properties Inc. allowed two of the city’s premier buildings – 801 N. Brand Blvd. and 700 N. Central Ave. – to fall into default, and moved one of its tenants, Zurich Insurance, to a downtown L.A. building it has retained. That helped push up the vacancy rate two-tenths of a point to 26.4 percent during the quarter.
The only real anomaly in the Tri-Cities were Pasadena asking rents, which rose three cents to $2.63 a square foot since the beginning of the year and held steady in the fourth quarter, even as Glendale and Burbank rents fell.
“Usually in this type of market we see pressure on quoted rents to be less as surrounding rents drop,” said Bill Boyd, senior managing director of brokerage services at Charles Dunn Co. Inc. in Glendale.
But he also noted that five-year lease rates are 10 percent to 20 percent below quoted rates due to rent abatements by landlords, who also are offering other generous concessions.
“Most of these current deals include turnkey improvements,” he said. “Five to 10 years ago, tenants were getting $10 per foot or less for construction and improvements. Now allowances can be $25 to $35 per square foot for build-out of walls, doors and carpeting.”
Green Dot Corp., a provider of prepaid debit cards, signed a lease for 140,000 square feet in east Pasadena at 3465 E. Foothill Blvd. The 10-year transaction is an expansion for the firm, based in Monrovia. The space is owned by Wells Realty, a real estate investment trust, and was previously leased by IndyMac Bank.
Structural engineering firm Saiful/Bouquet took 20,000 square feet at 155 N. Lake Ave., Pasadena. The company vacated space in the city at 385 E. Colorado Blvd., which was leased by Alexandria Real Estate Equities Inc.
Cogent Communications renewed for 48,627 square feet in east Pasadena at 2947 Bradley St. The 10-year transaction is with landlord Property Management Associates.
Law firm Christie Parker & Hale moved into its new 42,000-square-foot Glendale headquarters at 655 Central Ave. The nationally known intellectual property specialists got an aggressive 15-year lease deal and downsized slightly from its previous headquarters in Old Pasadena.
Maguire Properties Inc. allowed two of its Glendale properties, 801 N. Brand Blvd. and 700 N. Central Ave., to fall into foreclosure. The real estate investment trust is trimming its portfolio outside of its core downtown L.A. market, where it owns the U.S. Bank Tower and other trophy buildings. The two Glendale office buildings total nearly 420,000 square feet. The company also put its 611 N. Brand Blvd. office tower into special servicing status, often the first step before foreclosure.
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