A healthy media sector and aggressive leasing efforts are stabilizing the tough market for high-end office space in Burbank and Glendale.
In Burbank, the vacancy rate for top commercial space fell from 17.7% in the fourth quarter of 2010 to 15.6% in the first quarter of 2011, according to Grubb & Ellis Real Estate Services. In Glendale, the vacancy rate came off a high of 23.6% at the end of last year, to 23.1% by the end of March.
Film payroll firm Cast & Crew and Modern VideoFilm Inc. helped push the Burbank vacancy rate down by occupying space at 2300 W. Empire Ave. Last week, the Walt Disney Co. and the Disney Credit Union agreed to re-up for 33,000 square feet at 2411 W. Olive Ave.
Firms are looking to lock in leases on favorable terms and property owners are eager to oblige, agents said.
“Landlords have to be very aggressive to maintain their occupancy levels,” said Linda Lee, a Charles Dunn and Co. agent who represented the building owner on the Disney deals.
Robert Erickson of Lee & Associates said Burbank vacancy figures remain skewed by 2900 W. Alameda, a 480,000-square-foot, 14-story building completed just as the market hit the skids and that is still mostly empty. The vacancy rate in the media district is about 22%, Erickson said, while elsewhere in the city it is 14.5%.
Faith in the media sector is driving deals. This week, David Issaians, with Coldwell Banker Commercial in Glendale, and his team sold 211 S. Lake St. in Burbank, a 70,000-square-foot warehouse formerly used as overflow storage for Community Chevrolet.
Mark Pettibone and Bob Carter of Vast RE/Sources plan to convert the building into spaces for production and post-production firms.
“We’re bullish on Burbank,” Carter said. “We see it as having a distinct economy compared to the rest of L.A. and the Inland Empire because of the entertainment community.”
In Glendale, the market is continuing to recover from a decade-long building boom that went bust as banks took a beating during the economic downturn. Debra Greene of CB Richard Ellis Inc. said 500 N. Brand Blvd. is a case in point.
When investors bought the 23-story tower in 2008, it was 78% leased, she said. But the following year, federal regulators shuttered troubled Imperial Capital Bank, which occupied 12% of the building. Other tenants downsized or left.
In 2009 and 2010, the owners invested in green features, promoted a fully equipped conference space and concierge service for tenants, and got flexible on renegotiating leases and spaces.
By the fall, Greene said she expects the building to be 82% occupied.
“You have tenants out there looking at multiple buildings, trying to take advantage of what they see as heavy competition,” Greene said. “They are looking for best values.”
In Glendale, asking rents dropped from $2.64 per square foot in December to $2.59 per square foot in March, according to Grubb & Ellis. In Burbank, the figure held steady at $3.36 per square foot.
Erickson said he thinks it will be three years before rental rates rise.
“We’re close to the bottom or at the bottom,” he said. “Right now is a smart time to make long-term transactions.”