The Tri-Cities office submarket bounced back last quarter from a slow start to the year as activity in Glendale and Burbank heated up.
The 23.5 million-square-foot submarket, made up of Burbank, Glendale and Pasadena, saw its year-over-year vacancy rate drop 1.4 points to 17.4 percent in the second quarter, according to data compiled by Jones Lang LaSalle Inc. It was a four-tenths of a point improvement from the prior period and puts the submarket back on the recovery track it had been following the previous three quarters.
Tenants absorbed nearly 117,000 square feet, a dramatic improvement over the roughly 147,000 square feet it gave back in the previous quarter and the 33,643 square feet it gave back in the year-ago period.
In all, the tightening supply allowed landlords to push rents up 18 cents from the year earlier to $2.77 a square foot.
Of the three cities, Glendale’s vacancy rate fell the most, by 3.2 points, to 19.5 percent as tenants absorbed 83,716 square feet.
During the recession, “vacancy was up as high as 25 percent, so to see it drop under 20 percent is big news,” said Bill Boyd, a senior managing director at Charles Dunn Co. Inc.
Among the area’s largest deals last quarter was a lease inked by the state Board of Equalization for 35,000 square feet at 505 N. Brand Blvd. It plans to relocate from Van Nuys by the end of the year.
Burbank’s vacancy rate dropped 3 points year over year to 17.7 percent as lease by companies such as Omega Cinema Props helped take nearly 100,000 square feet off the market. It was welcome activity after the vacancy rate shot up last year when Walt Disney Co. vacated nearly a half-million square feet at 3900 W. Alameda Ave. Landlords increased asking rates 17 cents to $3.15.
On the other hand, Pasadena saw a significant amount of space returned to the market as a slew of formerly owner-occupied properties hit the market after being sold to investors. That extra space helped increase the city’s year-over-year vacancy rate by a point to 15.7 percent as it reported negative net absorption of more than 66,000 square feet.
Scott Steuber, principal at Avison Young Inc., said space hasn’t leased up yet because asking rents are still too high. Average lease rates rose 22 cents year over year to $2.65 a square foot last quarter.
Still, all those large empty swaths of space in the Tri-Cities create an opportunity for a large and growing company to swoop in and lease hundreds of thousands of square feet. Patrick Church at JLL said that could help the submarket have an impressive 2014.
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