Burbank, Glendale Space Race Cools Off
Slowing job growth in the entertainment sector has made luxury office projects in Burbank and Glendale a hard sell.
Six months away from completion, the 24-story Glendale Plaza has yet to sign a lease, and landowners who haven’t started construction on other office projects are scaling back plans or considering such alternatives as hotels.
However, Pete Hillman of PacTen Partners, developer of Glendale Plaza, says he is close to signing several leases for the building.
“Eight months to a year ago, the office market was really hot. Now we realize we may need more [hotel] rooms,” says Jeanne Armstrong, director of the Glendale Redevelopment Agency.
City officials there are now contemplating a hotel rather than a 23-story office building for a city-owned site on Brand Boulevard. And plans for the office portion of the Glendale Town Center retail complex at Brand and California Avenue have now been switched to a 300-to-350-room hotel.
Brokers say demand for office space simply isn’t growing at the same frenzied pace it did last year, when many of the new office projects were announced.
Entertainment firms, which developers thought would fill up their new buildings, are now cutting costs. And employment growth in that industry is slowing.
Vacancies have declined to 10% and 11% of the total office space in Burbank and Glendale, respectively, but the companies that are signing leases, brokers say, are such traditional tenants as insurance and law firms and finance companies.
“The entertainment industry has retreated from this market,” said Bill Boyd, a senior vice president with brokerage Grubb & Ellis Co.
Space in glitzy high-rises like Glendale Plaza and the proposed Burbank Media Center--which are asking tenants for $30 to $36 per square foot annually--is being passed over in favor of less glamorous buildings like 400 N. Brand, where rates are closer to $25.
Indeed, rents for existing Class A space in Burbank and Glendale may still be too low for some new projects to get off the ground. Industry watchers cite the example of Burbank Media Center, a 500,000-square-foot project near Olive and California avenues that was to have been developed by Equity Office Properties Trust and J.H. Snyder Co. beginning in late January.
It’s still a coming attraction, in part because its owners have been unable to sign a lease at the $35-to-$36 rate needed to justify construction. Developer Jerome Snyder says he is undeterred and is now seeking financing to buy the property outright from Equity.
“We have every intention of building this property,” Snyder said. But he intends to build it speculatively. “The only way I can pre-lease a building, is to practically give it away before construction.”
