Office vacancy rates dropping

Ryan Carter

Vacancies among the city’s largest office buildings decreased

dramatically between July and September compared to the same period

last year, according to a survey of major office space.

Cushman & Wakefield of California, a commercial brokerage firm

that conducted the survey, found that overall vacancy rates for

office buildings of 25,000 square feet and larger in the Media

District fell from 20.5% in July, August and September of 2002 to

4.7% this year.

The Media District is defined as the southern portion of the city,

closest to the Ventura (134) Freeway, near the studios.

In the section of the city referred to by Cushman and Wakefield as

City Center -- which includes Burbank Village and the Airport

District -- vacancy rates dropped from 39.2% in the third quarter of

last year to 24.7% this year.

“We are finally seeing the constraints of supply,” said Cushman &

Wakefield senior director Carl Muhlstein, a broker in the area for

several years.

As supply dries up, companies such as the studios are renting

space and consolidating in Burbank, Muhlstein said. And what new

buildings are being built are being leased out quickly, he said.

An example of leasing out quickly has been the Pinnacle building,

a new project in the heart of the Media District at 3400 W. Olive

Ave. It is more than 90% leased, Muhlstein said.

Warner Music Group last year signed what was dubbed one of the

area’s biggest deals when it entered into a 17-year lease to rent

195,000 square feet of office space in the building, developed by M.

David Paul. NBC Enterprises signed a 12-year lease for 18,000 square

feet in the building. And this year, Warner Bros. signed a 30-year

lease for space in the 450,000-square-foot Studio Plaza.

Muhlstein said Burbank is unusual because of it being a studio

hub, where the com- panies sign the long-term leases.

“They have better uses for their money, they can go rent,”

Muhlstein said.

The Cushman & Wakefield survey looked at 15 buildings in the Media

District and 31 in the City Center encompassing almost five million

square feet of space. City officials said office space vacancy rates

went down by their count about 6% in the second quarter compared to

last year in all office space in the city.

Some of that decrease could be attributed to a brighter economic

outlook and the gradual reduction of business woes after Sept. 11,

2001, said Ruth Davidson-Guerra, assistant community development

director for Housing and Redevelopment.

“Indications are that the economy is picking up,” Davidson-Guerra

said. “It has been a couple of years and things have kind of settled

down. Companies are looking at moving again or consolidating.”

Jack Kyser, chief economist for the Los Angeles County Economic

Development Corp., said his numbers are showing that office rates

have dipped slightly all over the county, with Burbank going from

16.6% in the second quarter to 14.6% in the third quarter.

“Firms are still a little cautious, but a lot of people are

becoming optimists, and slowly but surely business is coming back and

firms are expanding,” he said.

The 24.7% vacancy rate in the City Center was still relatively

high. Muhlstein said that represents new development in the Airport

District and space in the Village.

“Downtown Burbank has never been tight,” he said. “It is a smaller

tenant environment. I am not sure it has the synergistic locations

that the Media District does.”