The Tri-Cities office market slowed a bit in the first quarter as tenants vacated space, but landlords remained bullish in the face of the setback.
The Burbank-Glendale-Pasadena market saw its vacancy creep up six-tenths of a point to 17.8 percent in the quarter ended March 31 compared with the previous quarter. The submarket gave back 147,180 square feet, according to Jones Lang LaSalle Inc.
That decrease in net absorption ended what had been three consecutive quarters of improvement in the submarket’s vacancy rate, which was at 18.4 percent in the year-ago period.
“What the market did was take two steps forward and one step back,” said Bill Boyd, a senior managing director at Charles Dunn Co. Inc. who brokers deals in the Tri-Cites.
But landlords didn’t let one slow quarter dissuade them: They raised the average monthly Class A asking rents in the first quarter to $2.72 a square foot, up 8 cents from the previous quarter.
Tim Miller, a senior vice president at JLL, said that’s because in general the trend has been positive.
“Vacancy doesn’t look like it’s moving a lot, but a lot of space has been absorbed in the last six months and you’ve seen a big uptick in rental rates,” Miller said.
Burbank fared best in the quarter. The media and entertainment hub absorbed 51,612 square feet and saw its vacancy rate drop seven-tenths of a point to 19.1 percent. Rents ticked up to $3.17 a square foot, 12 cents higher than the prior period.
That’s good news for Santa Monica’s Worthe Real Estate Group, which has the task of leasing up the nearly empty 487,000-square-foot Burbank Tower at 3900 W. Alameda Ave. It bought the building from New York’s BlackRock Inc. for $109 million in January in one of the county’s top five sales last quarter.
Pasadena reported the lowest vacancy rate, 15 percent, in the Tri-Cities, though that was up nearly 2 points from the previous quarter. The market experienced negative absorption of 179,567 square feet, driven largely by AT&T reducing its size at 177 E. Colorado Blvd. as part of a sale-and-lease-back deal. As a result, landlords there considered the absorption dip a blip on the radar and increased average monthly asking rates by 4 cents to $2.51 a square foot a month.
In a sign of faith in the Pasadena market, developer IDS Real Estate Group broke ground in the first quarter on a $68 million mixed-use project known as the Playhouse Plaza that would add 124,000 square feet of Class A office space to the city.
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