Glendale Growth Formula a Winner : Downtown: The city has attracted new companies and kept office vacancy rates low. But the retail corridor has been slow to develop.

From a distance, downtown Glendale is all skyscrapers now, a far cry from the sleepy, one-story suburban town of the 1960s.

Lunchtime is bustling, the result of 20 years of redevelopment efforts by a City Council determined to lure big business to Brand Boulevard, the brick-lined street that is the city’s core.

The city boasts 4.8 million square feet of office space--most built during the last ten years--and a 14% office vacancy rate, considerably lower than Los Angeles’ overall rate of 20%. Major companies, including Nestle USA and International House of Pancakes, have set up headquarters in Glendale, leaving behind L. A.

By promoting careful growth when others ran wild with development, Glendale has increased its office space while maintaining a fairly low vacancy rate, despite the recession.

“Glendale has probably done the best job of any city” in Southern California, said Mike Zugsmith, president of Zugsmith-Thind, a commercial real estate firm in Encino. “They’ve managed to keep the character of the city and yet promote development.”

Because the city has been conservatively run and has little debt, Glendale has not reduced services as much as other municipalities have during the recession, giving it a strong competitive edge against downtown Los Angeles, Burbank and Pasadena in attracting new businesses, Zugsmith said.

However, slower to come than the high-rises is Glendale’s hoped for emergence as a thriving yuppie shopping and night life corridor to rival Pasadena’s Old Town, or Santa Monica’s Montana and Third streets.

Some retail stores in the new developments are struggling, and the newest office building--the Glendale City Center development that came on line in the depths of the recession--has a 60% vacancy rate. Commercial real estate agents note that Los Angeles, with its huge glut of offices, has cut its rents and Glendale no longer has noticeably cheaper office space.

Still, Glendale’s commercial real estate problems would be envied by most other Southern California cities. At a time when parts of West Los Angeles and the San Fernando Valley have more businesses moving out than moving in, every year since 1987 in Glendale businesses have leased 300,000 to 450,000 square feet of additional office space.

The city’s growth was carefully planned, starting with the formation of the Glendale Redevelopment Agency in 1972.

“In the early ‘80s, the city decided to create an urban downtown--not a suburban downtown--with high-rises and buildings coming down to the street,” said Jeanne Armstrong, who since 1989 has been the director of the Redevelopment Agency. So far, the city has shepherded the construction or remodeling of 22 buildings.

The vision of the city as an urban center called for a major change from the old Glendale, which looked like a Midwestern small town, its low-slung storefronts nestled in beneath surrounding hills.

Now, downtown is centered on Brand Boulevard, accessible to a triangle of freeways--the Golden State, the Ventura and the Glendale. Looming above are the glass-and-concrete fruits of the city’s labors. Fifteen office towers--ranging from eight to 22 floors--and seven low-rises were built in the past decade on an 11-block stretch of Brand Boulevard and two blocks on either side of it.

The freeway access, coupled with the new urban feel, has made Glendale attractive to businesses, said William Boyd, senior vice president of CB Commercial, the commercial real estate arm of Coldwell Banker in Glendale.

Both elements played a part in Nestle’s decision to move to Glendale in 1990.

“We looked at where the employees lived and we found that 60% of our people lived within 10 miles of a line from the San Gabriel Valley to Burbank,” and in the middle of that is Glendale, said Dick Curd, spokesman for Nestle USA. Nestle USA moved 12,000 employees to new corporate headquarters on Brand Boulevard from its offices on Wilshire Boulevard.

In 1991 International House of Pancakes moved its corporate headquarters and 100 employees to Brand Boulevard from North Hollywood.

And last month, Red Lion Inns opened a 350-room, 18-story hotel on Brand Boulevard.

“It’s a much nicer environment” for our employees, said Richard K. Herzer, CEO of International House of Pancakes. “The environment on Brand Boulevard is certainly much more urban than we had been used to, with shopping and restaurants.”

One reason Glendale has worked, said developer Chris Stirling, vice president of Homart Development Co., is that the City Council controlled growth in downtown, and because of that the city didn’t get overbuilt.

Homart’s building, the 18-story, $150-million Glendale City Center on Brand, which opened in 1991, is the most recent high-rise to be completed, and serves as a good example of both the strengths and weaknesses of Glendale. The building gleams with glass, and its sweeping shape draws the eye to a two-story retail arcade. Crown Books Superstore, at street level, is doing a brisk business.

But the two retail floors are more than half empty, Stirling said. There are several empty floors of office space, and the company has been forced to lower rents and offer office-improvement perks to attract tenants, he said. Because the building is so new, and there’s not much more coming on line, Stirling says he is confident that the City Center will soon be full. One new tenant, he said, is in the final stages of negotiating a lease that would cover several floors.

But the city faces some unforeseen problems that might make it difficult to fill new space.

The biggest snag is the economy. According to realtor Zugsmith, Glendale was in an excellent position to compete with downtown Los Angeles when that city was charging exorbitant rates for office space and Glendale could offer less hassle at lower prices.

But now, the slow economy and an office glut have forced L. A. rents to go lower than Glendale’s, he said, and the smaller city will have less advantage. In Homart’s City Center, for example, rents are about $27.50 per square foot, compared to $26 to $28 in Los Angeles, according to Stirling.

Another problem is that the bank credit crunch has made it nearly impossible to obtain financing for new development. Two downtown Glendale projects are stalled because of lack of financing, and city officials are worried that they won’t be able to construct enough buildings to continue to attract new business.

And while office vacancy rates in Glendale are still low compared to other areas, it is proving more difficult to attract and keep retail tenants in the new projects.

In the Exchange, a complex spanning two city blocks from Brand Boulevard to Louise Street and Broadway to Wilson Avenue, five of 40 storefronts are vacant, despite an eight-screen Mann’s cinema complex, restaurants, boutiques and a Ben & Jerry’s ice cream shop. Across Broadway, where the city had planned to put another retail and entertainment center, an entire block sits empty and boarded up, waiting for a developer and tenants.

The trouble, according to retailers and developers, is that Glendale has not yet established itself in consumers’ minds as a place to shop or look for night life.

One hurdle for merchants is the 1.6-million-square-foot Glendale Galleria, ironically the Redevelopment Agency’s first project.

Just a block away from downtown, the Galleria attracts about 50,000 customers per day, according to Galleria officials, and does so much business that it adds $3 million per year to the city’s coffers from sales tax receipts.

Retailers downtown say many of those shoppers don’t realize that they are a stone’s throw away from the Exchange and other businesses outside of the mall. “It’s difficult to develop an area from a dead stop,” said Vince Petito, who for two years has owned The Toy Depot on Maryland Avenue

across from the movie theater complex.

Business, Petito said, has been spotty, although it has shown a tremendous increase since the theaters opened in 1991.

But Petito says he is determined to press forward, and has joined a group of merchants who have banded together to advertise their presence to potential customers.

“We are in the process not only of making consumers aware that we are here, but waiting for shopping patterns to change,” said Lynn Baron, whose women’s clothing store, Le Jardin, is across from the cinema complex. Baron moved her store to the Exchange in 1990. “Glendale has never been a strong retail town.”

But the city is working on that. In separate transactions in 1991 and 1992, the Redevelopment Agency bought the land around the Alex Theater, a once-proud vaudeville theater that had been used as a cinema, and is remodeling it as a stage and retail complex. And the city recently appropriated $1.5 million for grants to merchants on Brand Boulevard near the Alex to spruce up the facades of their buildings.

Slowly, the merchants say, conditions are improving. Toy Depot had its best Christmas ever. Le Jardin, Baron’s clothing store, has been open until 9 or 10 p.m. on Friday nights to accommodate the movie crowd.

Retailer Steven Hajn thinks he’s retiring just when things are getting better.

Steven and Eva Hajn own Williams Bros. Cutlery on Broadway. The Hajns have lived in Glendale since coming to the United States in 1958, and have operated their knife-sharpening and cutlery-sales business in Glendale for six years, after more than two decades in Los Angeles.

“When we moved here, it was really nothing,” Hajn said. “Now people know us. Every week I have new customers.”