The Tri-Cities office submarket showed notable improvement in the fourth quarter as Pasadena reported positive net absorption for the first time all year.
The broader submarket, which includes Burbank, Glendale and Pasadena, saw vacancy decline 1.7 points to 15.5 percent year over year as tenants took 206,281 square feet, according to Jones Lang LaSalle Inc. Monthly Class A asking rates rose 18 cents to $2.82 a square foot.
Bill Boyd, senior managing director at Charles Dunn Co. Inc., said leasing activity in Glendale and Burbank is almost the best it’s ever been.
“It’s remarkably significant that both Burbank and Glendale experienced a year in 2014 similar to the best years of the ’80s and ’90s when the whole Tri-Cities corridor was absorbing 1 million square feet a year,” he said.
Glendale saw the largest decline in vacancy in the submarket with its vacancy dropping a full 5.1 points from the year-ago quarter to finish 2014 at 15.4 percent, well below the Los Angeles County average. Tenants took 95,000 square feet off the Glendale submarket even as landlords pushed monthly Class A asking rates up 9 cents from the same period in 2013 to $2.54 a square foot.
High-end gym Equinox Fitness signed a lease for the 27,000-square-foot second floor of 207 Goode Ave. with landlords Lincoln Property Co. and Morgan Stanley & Co. Terms were not disclosed but asking rates are about $2.50 a square foot there.
The strength of that market helped LaSalle Investment Management obtain an impressive $83.2 million – or $260 a square foot – sale price for its 320,000-square-foot building at 505 N. Brand Blvd. It was the top sale in the Tri-Cities last quarter and the fifth-highest single-office building sale in the county. Buyer Principal Real Estate Investors of Des Moines, Iowa, is betting that Glendale continues to improve.
In Burbank, tenants took 71,182 square feet off the market, helping push its vacancy rate down to 15.9 percent from 19.8 percent in the year-ago period. Landlords increased rates by 19 cents to $3.24 a square foot over the same period.
Entertainment payroll company Cast & Crew Entertainment Services expanded by 20,000 square feet for a total 70,000 square feet at 2300 Empire Ave., owned by Walton Street Capital.
Pasadena reported positive net absorption of 40,000 square feet, the first time it reported positive absorption since the fourth quarter of 2013. While that’s good news, the vacancy rate was still up 2.2 points from the year-ago quarter. However, the activity helped inch that rate down four-tenths of a point to 15.3 percent from the previous quarter.
Pasadena has 155,000 square feet of office space under construction, with many of the landlords for those projects asking $3 or more per square foot, though few of them have landed any tenants yet.
“All of those new projects have a ton of available space and aren’t hitting pro-forma numbers because there’s not enough growth quite yet to justify those rents,” said Patrick Church, managing director at JLL.
– Jacquelyn Ryan
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