Office vacancies rise again

GLENDALE — Glendale’s office vacancy rate was on the decline for most of last year, but it crept up by about 1% in the fourth quarter of 2007.

After posting a 13.2% vacancy rate in the third quarter — Glendale’s lowest vacancy rate in at least two years — 52,850 square feet in lost tenancies between October and December pushed the current rate up to 14.1%, according to data compiled by the real estate firm Grubb & Ellis.

The slight break in Glendale’s recent gains in the market mirrored fourth-quarter losses in neighboring Pasadena and Burbank, both traditionally tight office environments that repeatedly lost tenants to Glendale earlier in the year as some companies looking to expand couldn’t find ample room in their home city.

Market watchers say the fourth quarter jump in vacancies in all three cities was due in part to tenants’ reaction to steadily rising rental rates despite a slowing economy.

Pasadena, where rates are highest in the tri-cities region, saw 344,991 square feet of space go vacant in 2007, more than two-thirds of which was lost in the fourth quarter.

While companies like Yellowpages.com, which relocated to Glendale in March, left Pasadena because they couldn’t find ample contiguous space there, others are likely fleeing purely for cheaper rents, said Bill Boyd, executive vice president at Grubb & Ellis. But with Glendale rates similarly on the rise, some of those departing Pasadena are headed farther east to San Gabriel Valley markets, Boyd said.

Though still well under Pasadena’s rate, which crept to about $3.94 per square foot in the fourth quarter, and the $3.26-per-square-foot prices in Burbank, rents in Glendale are approaching the $3-per-square-foot mark.

Average class A rents for Glendale office space rose to about $2.91 per square foot in the fourth quarter, up from $2.58 per square foot in December 2006.

“In Pasadena, it was the reaction to the sticker shock — the price of the increased rental rates in Pasadena that caused several tenants to relocate rather than pay the higher rental rate,” Boyd said.

But in 2008, some say landlords will have to get more aggressive on deals to attract and retain tenants, which likely points to more stable growth.

“In Glendale, I believe rates will probably flatten out this year. . . . I think Glendale will experience the same hiccup but maybe a little longer [than Pasadena and Burbank],” said Steven Marcus, an associate with real estate firm Colliers International. “Maybe six months, and then potential concessions from landlords. We’re seeing the landlords swinging toward the tenants right now. There’s a little blood in the water.”

 RYAN VAILLANCOURT covers business, politics and the foothills. He may be reached at (818) 637-3215 or by e-mail at ryan.vaillancourt@latimes.com.