Although there has been an achingly slow, but steady recovery in the real estate market, experts remain bearish on new commercial developments, and for good reason. The demand just isn’t there yet.
One reason: Businesses are cramming more people per square foot into the buildings they lease than they did in previous decades in order to decrease overhead costs.
Burbank’s current office vacancy rate is 12.1%. This is not a number that should necessarily cause alarm, as the national office vacancy rate this year is somewhere between 15% and 17%, according to various reports issued by real estate groups. Nonetheless, economists like to see a vacancy rate that’s closer to 8%, leaving Burbank a distance to go to achieve that goal.
For that reason we believe this week’s decision by Burbank-Glendale-Pasadena Authority officials to reduce a commercial development planned for its 58-acre parcel on Hollywood Way was a wise one. Specifically, the decision was made to drop the overall size of the development from up to 3 million square feet to roughly 2.3 million square feet, and to shift some space previously designated for office space to flex/industrial space. Such structures are easier, faster and therefore less expensive to build — and they are far more likely to entice tenants in the current marketplace than are office buildings.
This necessary rethinking of the project might not have come about had it not been for public comments urging that the project be reduced in size. The airport authority’s leaders listened and took to heart the input they received from local residents. We believe this bodes well for the project itself and for the city, which will not be stuck with a glut of empty office space on its hands.