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Wednesday, Jun 7, 2023

Parsing the ‘Caruso Effect’

The retail synergy between Rick Caruso’s Americana at Brand and General Growth Properties’ Glendale Galleria has amped up foot traffic to downtown Glendale, but can Americana’s 2008 arrival be credited for Glendale’s overall renaissance during the past decade? “Yes and no” appears to be the consensus among Glendale real estate leaders. “The Americana at Brand had a really positive impact. Was it Rick’s magic? I don’t know,” said Phillip Lanzafame, director of Glendale’s Community Development Department. “Certainly, he had a great influence on the success of that project, and a project done well is going to spur well.” Lanzafame also credits Glendale’s engaged civic leaders. “Some of it was good planning, some of it was fortunate timing, but Glendale was well-positioned,” Lanzafame said. “There was space for corporations to come and grow.” “Glendale historically was kind of the sleeper,” said CBRE Los Angeles North Region Managing Director David Josker. “In the last 10 years, Glendale has transformed. A big reason for that is with their leadership being very business-friendly and creative.” Glendale’s convenient location near downtown L.A. and well-known neighborhoods such as Atwater Village and Frogtown sweetens the deal for office tenants, said CBRE Senior Managing Director Natalie Bazarevitsch. “Pasadena went through a similar renaissance; nice momentum with retail and residential followed,” Josker added. “Glendale is now going through that pattern.” ‘A decade evolution’ Bazarevitsch called Glendale’s last 10 years transformative. “A decade evolution,” she told the Business Journal. “The catalyst was the Americana at Brand.” Indeed, many attribute Glendale’s blossoming to “the Caruso effect” or “the halo effect from the Americana,” as Lewis Roca Rothgerber Christie LLP Chief Financial Officer Albert Woo told the Business Journal. Since Americana’s debut, many upscale restaurants, cafes and stores have opened along the outdoor mall’s parameters. The city finally has its own Katsuya, Lemonade, Frida Mexican Cuisine, Din Tai Fung, Philz Coffee and Shake Shack. “The growth has been nothing short of phenomenal,” Woo said. “It absolutely did help the office population provide more options for lunch,” agreed Charles Dunn Co.’s William Boyd, who nevertheless stops short of crediting Caruso’s complex for single-handedly reinvigorating Glendale. In his experience, the retail center has not been impactful on bringing business to Glendale. “Office tenants won’t come because of the Americana,” he said. “No one has come because of the Americana. Glendale has gotten deals because the office space is more affordable than Pasadena.” With 4,000 units of housing currently under construction downtown, Glendale seems poised to provide the housing necessary to accommodate incoming companies. But Boyd questions whether creating more housing will translate into attracting companies to Glendale. He points to downtown L.A., where despite a high volume of residential units coming online, office vacancy has remained high. Historically, CBRE’s own research appears to support Boyd’s theory on office space. An overview provided by CBRE Southern California Research Senior Research Analyst David Nusbaum showed that direct vacancies in office leasing for Glendale peaked at 18.7 percent in the quarter following Americana’s grand opening with 1.2 million direct square feet available. A year later, third-quarter vacancies rose to 23.6 percent. By 2013’s third quarter, vacancies dipped to 16.5 percent and hit a nadir of 9.7 percent by late 2016. Nestlé void Impacting Glendale’s recent percentiles: longtime 800 N. Brand tenant Nestlé USA’s exit to Virginia will gradually free up 12 floors with a total of 280,000 square feet of office space. CBRE is the brokerage for the building. Boyd is not sure how fast an influx of startups and established companies can fill Nestlé’s void anytime soon. “Maybe CBRE will find a subtenant. But to say there’ll be more higher-paying jobs or higher tech jobs coming in, there’s no evidence for that,” Boyd said. Despite fluctuations in Glendale’s vacancy rate, Nusbaum believes a company or two will eventually absorb 800 N. Brand’s 12 floors. “Companies want to be in L.A. We have great office space, great live/work/play environment. If you look at demographic trends, this area is projected to keep growing over time.” Glendale landlords are competing to make their buildings more amenable and attractive for tenants and buyers, CBRE’s Bazarevitsch said. Upgrades have attracted less conventional businesses — 801 N. Brand’s largest tenant ServiceTitan, which recently doubled its square-footage to 55,000 square feet, is the type of tech enterprise normally associated with Silicon Beach, she noted. And Caruso is part of this tenant shift. According to insiders, CBRE Southern California President Lewis Horne’s friendship with developer Caruso facilitated CBRE’s own relocation from Universal City to Glendale’s 234 S. Brand Blvd. After acquiring the former Masonic Temple building for $6.6 million in 2015, Caruso transformed it into a top-tier, contemporary office location. “We’re just one example of buying into the transformation and loving it,” said Bazarevitsch, who works there. “The Americana was absolutely one of the reasons (for CBRE’s relocation),” her colleague Josker added. — Michael Aushenker

Michael Aushenker
Michael Aushenker
A graduate of Cornell University, Michael covers commercial real estate for the San Fernando Valley Business Journal. Prior to the Business Journal, Michael covered the community and entertainment beats as a staff writer for various newspapers, including the Jewish Journal of Greater Los Angeles, The Palisadian-Post, The Argonaut and Acorn Newspapers. He has also freelanced for the Santa Barbara Independent, VC Reporter, Malibu Times and Los Feliz Ledger.

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