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Friday, Dec 1, 2023

REAL ESTATE QUARTERLY: Mixed Bag on Tenancy But Investors Score Buildings in Both Cities

-Worthe Real Estate Group’s Tower Burbank has attracted iHeartRadio. The Internet radio streaming service is in negotiations to lease 120,000 square feet at the 487,000-square-foot office building at 3900 W. Alameda Ave. in Burbank. The company would move from its home at 3300 W. Olive Ave., owned by Hudson Pacific Properties Inc. Asking rates at the Tower are about $3.50 to almost $4 a square foot. -The DreamWorks Animation SKG Inc. campus was sold in July only six months after the studio initially sold it. SunTrust Banks Inc. in Atlanta sold the Glendale headquarters campus, at 1401 Flower St., for $215 million to Griffin Capital Essential Asset REIT in El Segundo. SunTrust bought the campus from the studio for $185 million. -Applebee’s International Inc. is moving its headquarters to Glendale. Parent DineEquity Inc. will relocate Applebee’s headquarters from Kansas City, Mo., into the restaurant operator’s corporate offices at 450 N. Brand Blvd. About 10 percent to 20 percent of the 220 employees in Kansas City will relocate. -CBRE Global Investors Ltd. sold the Burbank Empire Center office buildings for $80.4 million in August to UBS Realty Investors. The two-building property, totaling 230,000 square feet at 2350 and 2400 Empire Ave., was fully leased to Deluxe Digital Studios, Allianz Insurance and others. -Los Angeles County’s largest credit union, Logix Federal Credit Union, decided to leave its Burbank headquarters of 30 years for a new 170,000-square-foot facility it plans to build in Santa Clarita. The credit union had been in 75,000 square feet at 2340 N. Hollywood Way but outgrew the space. Burbank and Glendale’s office lease markets had ups and downs in the third quarter but both saw strong investment sales. Burbank’s vacancy rate grew four-tenths of a point to 16.1 percent as the tenants gave back 48,200 square feet in the quarter, according to data compiled by Colliers International. It was still an improvement from the year-ago period when the vacancy rate stood at 17.3 percent. Brokers said the negative absorption is likely a blip on the radar as it followed several quarters of exceptionally strong leasing. In the second quarter alone, Burbank tenants took up 184,100 square feet, for example. Some companies are simply outgrowing the market. Logix Federal Credit Union, Los Angeles County’s largest credit union, announced last quarter that it would leave its home at 2340 N. Hollywood Way, where it has occupied 75,000 square feet for the last three decades. The firm bought a 12-acre parcel in Santa Clarita where it plans to build a 170,000-square-foot headquarters. Among media tenants, iHeartRadio, an Internet radio streaming service, began negotiations during the quarter for 120,000 square feet at Worthe Real Estate Group’s Tower Burbank project. The building, a 487,000-square-foot tower at 3900 W. Alameda Ave. that Walt Disney Co. vacated in 2013, has been updated into creative offices specifically to attract this type of company. IHeartRadio would move from Hudson Pacific Properties Inc.’s 3300 W. Olive Ave. building nearby. The deal would be one of the first in the Tower Burbank, which Worthe has been renovating since purchasing the vacant property in March of last year for $109 million. “Jeff Worthe knows what to do and the results will speak for themselves,” said Josef Farrar, executive managing director at brokerage Newmark Grubb Knight Frank in downtown Los Angeles. “Wherever he has a building, he has always done well.” In all, Burbank landlords kept asking rents at $3.04 a square foot in the third quarter. That’s a 12-cent premium to asking rates from the year-ago quarter. Glendale’s vacancy rate fell 1.2 points from the second quarter to 13.5 percent, culminating an impressive 4.8-point drop from the year-ago quarter. That tightening allowed landlords to push rates up 4 cents to $2.54 a square foot. That’s up 16 cents from the third quarter last year but still a substantial discount to neighboring competitors Burbank and Pasadena. “Glendale’s more affordable office rents are responsible for that city’s office space absorption,” said Bill Boyd at Charles Dunn Co. Inc. in Glendale. But the biggest news out of Glendale last quarter was the sale of the DreamWorks Animation SKG Inc.’s campus – again. The sale of the campus, at 1401 Flower St., may earn the studio $15 million as part of a deal made when it sold the campus initially to SunTrust earlier this year. DreamWorks Animation has a 20-year lease at the campus. – Jacquelyn Ryan

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