After taking longer to recover from the Great Recession than its Tri-City counterparts of Burbank and Pasadena, Glendale is rebounding. The office market is getting tighter as the vacancy rate drops, and landlords will soon have the upper hand to raise rents, commercial real estate brokers say. Researchers with L.A.’s CBRE Group Inc. report that in the first quarter, Glendale’s office vacancy rate fell to about 13 percent, levels not seen since pre-recession times in early 2008. Vacancy reached a high of 24.8 percent in the first quarter of 2011. The city’s office market is now as tight as that of the overall Tri-Cities. “In relative terms, it’s among the most active markets in Los Angeles,” said Doug Marlow, a CBRE executive vice president. “Glendale’s office base is 6.7 million square feet so if it moves down to about 13.1 percent, that means net absorption of almost 877,700 square feet. That’s a big move, especially for a market of this size.” And with no new product slatted for development, Marlow added, “This is going to become an extremely tight market in the very short term.” Driving the tightening conditions are more than 3,600 multifamily units coming onto the market, Marlow said, turning the business district into an “urban 24/7 environment.” Another factor driving the office market rebound is retail. The Americana at Brand shopping mall and the Glendale Galleria remodeling have helped attract more retail and restaurants, Marlow added. Residents have followed and businesses have followed them, he said. If the dropping vacancy rate reaches 10 percent, he anticipates rents will jump at least 3.5 to 4 percent in the near-term. Leases for Class A space he and his team did in 2012 at $2 a square foot are now renting at $2.65, he said. Max Saia, a senior research analyst for CBRE, attributes Glendale’s growth to the increasing average household income of its residents to $82,000 from $60,000 in 2000. Institutional capital is taking notice and buying large office buildings, he said, citing two major May sales of Class A properties as examples. Plano, Texas’ Granite Properties Inc. purchased 550 N. Brand Blvd. for $79.7 million and Burbank’s Volwood Corp. paid $27.3 million for 500 N. Central Ave. Land Turnover Newhall Ranch, the vast master-planned community proposed for Valencia, has combined with three other similar communities into a newly-formed holding company under a deal that closed last month. The Newhall Ranch project has joined with projects in San Francisco and Irvine and the company that previously managed them, FivePoint Communities Management Inc., into the new Five Point Holdings in Aliso Viejo. Miami, Fla. national homebuilder Lennar Corp., which had ownership in the planned developments and in FivePoint Communities, announced the consolidation in July 2015 but said it was contingent upon Five Point Holdings going public within a year. Last month, however, the parties agreed to merge without the initial public offering completed, and closed the deal. Lennar reported the update in a filing with the Securities and Exchange Commission. “This transaction marked the next step in Five Point’s strategic evolution as a leader in the management and development of large master-planned communities,” said Lennar Chief Executive Stuart Miller in the company’s second-quarter report. Lennar formed the management company, FivePoint Communities Management Inc., in 2011 to manage several of its large California properties as a consolidated joint venture. Newhall Ranch, proposed by Newhall Land & Farming, is considered the second phase of Valencia’s development. Plans include 21,500 homes, 11.6 million square feet of commercial space, seven schools, 275 acres of parks and 60 miles of trails on 15,000 acres. Five Point did not provide further comment for publication. Apartment Draw No longer willing to merely invest in and manage properties, Tarzana real estate investment and management firm Gelt Inc. plans to develop its first ground-up apartment project in Reseda. Gelt bought 2.4 acres at 6625 Reseda Blvd., a property already entitled for apartments near the Providence Tarzana Medical Center, from Metric Holdings. Gelt would not disclose the price. It plans to develop The Watermark apartments with 254 studios, one-, two- and three-bedroom units, 422 underground parking spaces, 6,600 square feet of retail space and 13,500 square feet of self-storage. Gelt expects to finish the complex in early 2019, and said the value will be $85 million to $100 million once completed. “Gelt will be seeking other key infill locations for development opportunities over the next 12 to 24 months as we see the demand continuing to grow even stronger,” said Keith Wasserman, a partner with Gelt. Staff Reporter Carol Lawrence can be reached at (818) 316-3123 or [email protected].
