When Zurich North America leaves the Glendale office market this summer, it will be the latest in a roster of tenants abandoning a city that has long been pro business and looks like it should be attractive to companies.

The city boasts of having no gross receipts or business license taxes, and the Brand Boulevard office hub is wide, clean and lined with tidy mid-rises built mostly in the 1980s. Down the street are the Americana at Brand and Glendale Galleria powerhouse malls, where employees can shop.

Yet the buildings are riddled with empty offices, and the market currently has the unpleasant distinction of having the fourth highest commercial vacancy rate in Los Angeles County with nearly one-quarter of its Class A space vacant. Emblematic of the problems: a mid-rise at 207 Goode Ave. that McGuire Properties Inc. opened in 2009 and remains virtually unoccupied.

“It is clearly an eyesore of vacancy, reflective of the market – especially at night when you can see clear through the shell condition space on each floor,” said Arty Maharajh, a senior research analyst at brokerage Transwestern.

It’s been a gradual, but ultimately dramatic, change for the 6.3 million-square-foot market that was established largely through aggressive redevelopment and at one time was a growing regional financial center for insurers and banks.

Even Americana at Brand developer Rick Caruso alluded to the problem this year when he announced he wanted to work with the Glendale Galleria’s owner to not only update the aging mall, but revitalize the entire Brand Boulevard corridor.

So what’s gone wrong?

Consider Zurich, a unit of Swiss insurance giant Zurich Financial Services Ltd., which had long occupied nearly 50,000 square feet at 801 N. Brand but is moving to downtown Los Angeles.

It’s taking space at 777 S. Figueroa St., a 52-story high-rise that is the headquarters of American Insurance Group Inc. and is part of a growing insurance hub that includes Aon Corp., Marsh & McLennan Cos., and other large insurers and brokers.

“Glendale is a nice little city. There’s nothing wrong with it,” said Zurich Senior Vice President Bill Blake. “I just don’t think it’s the right spot for us given where our business gets transacted. Our business is a people business. We need to be in close proximity to our brokers. But since everybody is downtown, we’d be one of the few major players who isn’t downtown.”

Exodus

That’s a reversal for Glendale, which was able to attract insurers and brokerages as they left their fading Mid-Wilshire stronghold in the 1970s and 1980s. Over the last decade, however, the industry has contracted and a resurgent downtown Los Angeles has emerged as a center for professional service firms.

Among the other companies that left Glendale for various locales are Aetna Insurance and Fremont Compensation Insurance Group. Next year, the State Compensation Insurance Fund plans to vacate six floors and more than 50,000 square feet at 655 N. Central Ave., a building that still is the regional offices for disability insurer Unum.

But even those that have remained have cut back. State Farm is shedding 9,000 square feet when it will move from 701 N. Brand into 25,000 square feet at 655 N. Central next month.

The city also acutely suffered during the financial crisis and recession as tenants left for Burbank and Pasadena, the two other members of the Tri-Cities office market. Previously, Glendale’s location helped it get overflow both from Burbank, which bills itself as Media City and boasts the headquarters of Walt Disney Co., and Pasadena, a hub for tech that is a home to multinational engineering firms such as Parsons Corp.

In 2007, Warner Bros. Animation closed its offices in Glendale and consolidated into the main studio campus in Burbank.

“Some tenants might consider Glendale, but at the end of the day it doesn’t have those (entertainment and engineering) drivers,” said Shaun Stiles, director of office properties at Colliers International’s downtown office. “You don’t have a real leading industry where you are able to get a lot of absorption.”

That’s not to say Glendale doesn’t have strengths. It is still a safe, low-tax and accessible city surrounded by several freeways – the same attributes that helped its build its office market from scratch in the 1980s.

Earlier this year, the city attracted LegalZoom.com, which moved into 101 N. Brand from Hollywood after a dispute with the city of Los Angeles over business taxes. The company wasn’t silent about Glendale’s tax advantages.

Recently, Glendale’s economic development team has been trying to promote such advantages, boasting in promotional materials that an average business would save up to $20,000 annually in Glendale versus Los Angeles, Burbank and Pasadena.

The city also introduced a business incentive in April that includes providing up to $250,000 in cash matching grants for building improvements to companies moving into the city’s nearby Creative Corridor along San Fernando Road, where DreamWorks Animation SKG Inc. has its headquarters.

Mall developer Caruso, meanwhile, wants to revitalize retail on Brand, which at the street level is dotted with mostly unremarkable shops and restaurants.

Zurich’s Blake said that one attraction of downtown Los Angeles is that employees will be in walking distance to more shops and restaurants, while Glendale’s two big malls are too far away for a lunch-time jaunt.

Bill Boyd, senior managing director of Charles Dunn Co.’s Glendale office, said that any real renaissance of the office market will likely have to await an improving market.

The recession has been brutal to Glendale. In the first quarter, the vacancy rate was 23.1 percent, more than two points higher than a year earlier and more than six points higher than the county average. One tenant benefit: asking rents have dropped to $2.59, about 35 cents lower than the county average.

“Maybe there will be a new industry. We couldn’t have imagined the dot-coms and that they’d take as much space as they did (elsewhere),” Boyd said. “Glendale is poised to capture the new and future tenant demand – it’s just there is no tenant demand in the marketplace.”