Office buildings with the highest vacancy rates

For some, construction kicked off during better years, when office rentals in prime locales seemed a sure shot for developers. Others are older, once bustling but now deserted after hemorrhaging tenants during the economic downturn.

But one way or another, they are among the emptiest office buildings in Southern California.

A number of the highest- vacancy buildings are in Burbank and Glendale, according to data from CoStar Group Inc. The real estate research firm looked at the percentage of space that was rented out at Class A office buildings with 300,000 square feet or more.

The buildings on the lists -- 10 each in Los Angeles and Orange counties -- represent the least among the leased. With the economic malaise, businesses are employing fewer people and using less office space despite cheaper rents. Though other sectors of the economy have shown new life, leasing agents for many large office buildings have had little reason for optimism.

The challenges facing Glendale’s 505 Brand Blvd. -- which ranked seventh in terms of unleased space in Los Angeles County -- reflect the story of that area as a whole.

During the late 1990s, nearby movie and television studios were booming. Needing room to expand, they pushed many nonessential offices off their lots, creating an influx into rented spaces in Glendale and Burbank. The boon for office leasing agents in the area deflated in recent years as the recession-stung studios began drawing back into their lots.

Warner Bros. occupied three full floors of the Brand property until it vacated the office space in 2008, leaving an enormous hole in occupancy, leasing director John McAniff of brokerage Jones Lang LaSalle said.

“We’ve been able to replace just a piece,” he said. “Not very much of it.”

McAniff said the building’s occupancy is a few percentage points higher than CoStar’s information, which places it at 67% leased. Despite the vacancies, McAniff said his leasing agency would continue to seek out only “the right type of tenants.” That includes large corporate and professional firms looking to stay long term.

“We’re not going to chase any little firm,” McAniff said. “We’re not going to chase occupancy at the expense of value.”

Tied for emptiest in Los Angeles County are two office buildings in Burbank that opened last year, both showing a grim zero occupancy. Together they offer more than 830,000 square feet of vacant office space.

Construction for one -- on West Empire Avenue -- began three years ago. Patrick Church, a senior vice president at commercial real estate company CB Richard Ellis, declined to discuss the details, but he said the leasing agent was seeking a mix of entertainment and professional firms.

He said the zero occupancy rate wasn’t a surprise.

“There was no pre-leasing that was anticipated,” Church said. “Clients want to see a finished product.”

The other empty Burbank property is on West Alameda Avenue close to NBC Studios. This one was designed exclusively for entertainment industry tenants.

“Clearly everything’s a challenge these days,” said R. Todd Doney, vice chairman of CB Richard Ellis, the leasing company for the property. Doney said construction began in 2008 and the building opened last year.

Third on the list is an older 13-story Inglewood building near Los Angeles International Airport that used to house the headquarters of nutrition company Herbalife Ltd. More than 40% of the building is unleased, but that’s an improvement from a couple of years ago, when more than two-thirds of the space had no tenants, property manager Akila Murphy said.

With almost 200,000 square feet lying fallow, the building management has not been picky about the industries in which potential tenants work.

“Just all sorts of business,” Murphy said. “A wide variety.”

In Orange County, most of the top 10 emptiest spaces are in Irvine. At the top of CoStar’s list is a 13-story Irvine building with just over two-thirds of its space unleased.

Steve Case, a vice president at Irvine Co.'s Irvine Office Properties, the leasing company for several of the buildings on the Orange County list, said the office rental industry’s woes in the area can be attributed to the hard times that hit the many mortgage companies in Irvine and other parts of the county.

“A lot of them no longer exist,” he said. “Particularly subprime companies.”

Case said Irvine Co.'s buildings had seen a drastic increase in leasing recently.

“They may not be hiring yet,” he said, “but what we’re hearing from the companies that are beginning to lease is they’re getting ready to hire.”