Open space also found in offices

DOWNTOWN — Glendale has more than a million square feet of vacant office space and Burbank may soon hit that number, with two massive developments nearing completion that have not yet been leased and could increase competition for renters, real estate managers said.

Entire floors of Glendale buildings have been empty for months, despite the city’s low rents and business taxes, officials said. And the city’s vacancy rates are the fourth highest in Los Angeles County, at 16.8%, according to a recent report by real estate firm Grubb & Ellis.

Burbank’s vacancy rate is just 4%, but its empty office space will grow from its current 214,454 square feet to more than a million after two new developments, at 2900 W. Alameda Ave. and 2300 W. Empire Ave., are finished.

The two buildings are awaiting certification for the highest energy efficiency and environmental standards, and Burbank officials are confident they are attractive enough to fill with tenants, said Scott McGookin, an economic development manager for the city.

But that could complicate matters for real estate managers in Glendale, where a new building, at 207 Goode Ave., is set to add more than 186,000 square feet of empty space to the city’s already soft market for office real estate.

“The number’s going to get really nasty when that building gets delivered,” said Linda Lee, a senior managing director for the Charles Dunn Company, a real estate firm with an office in Glendale.

Lee projected Glendale’s vacancy rate would climb to 19% when the new building is accounted for.

The surge in new space, combined with current vacancies that have increased in recent years, could further drive down rental rates and hurt businesses that benefit from the daytime foot traffic of office workers, said Nancy Sidhu, chief economist for the Los Angeles County Economic Development Corporation.

Building owners and managers are the most vulnerable during periods of high vacancies, but the businesses that are accustomed to selling goods and services to employees from downtown offices have likely felt the effect of the shrinking occupancy rates, Sidhu said.

“They feel a spillover impact from the rising vacancies, because the rising vacancies essentially means fewer people are in the building than used to be,” Sidhu said.

Although the amount of Glendale’s vacant office space has steadily grown in recent years, the city’s current rate of unoccupied square footage is a product of the nation’s economic recession that has been a part of the impact on local businesses, Mayor John Drayman said.

“The corporate world is going through an economic convulsion and they are contracting some of the workforces,” Drayman said. “And those feet aren’t on our sidewalk every day, buying those goods and services.”

Officials and real estate managers have been scrambling to attract businesses with the promise of friendly laws and proximity to freeways and important commercial hubs, like downtown Los Angeles and Hollywood.

A big part of the effort in Glendale has been developing the city’s image as a business destination, Lee said.

“It think it’s to rebuild the cache of Glendale as a great place to be located for their businesses,” she said.

Glendale recently launched a sleek new website with a video advertisement and information about “The Glendale Advantage” called thinkglendale.com. The effort is aimed at building awareness for the city’s business climate, said Philip Lanzafame, Glendale’s director of development services.

“We have the competitive lease rates,” Lanzafame said of rents that are lower than those in neighboring Pasadena and Burbank. “And actually, that is a good thing for business when they’re looking at just their costs.”

That may be the city’s strongest differentiating factor during the recession, said Judee Kendall, executive director of the Glendale Chamber of Commerce.

“I guess the good thing about it is, for those who want to move to Glendale, there are some very good deals to be had,” she said.