Real estate brokers have had a hard time attracting tenants to empty spaces because most companies are not looking to expand during the recession, said Patrick Church, a senior vice president at real estate firm C.B. Richard Ellis.
“There’s no tenant velocity right now,” Church said.
Although vacancy rates in both cities are high, Burbank’s surplus of office real estate is largely a result of two new developments that combined to add about 800,000 square feet of space to the market in 2009.
Burbank also saw a slight increase in office tenants compared with the fourth quarter of 2009, when the vacancy rate was 17.8%, according to the report.
The vacancy rate in Glendale, however, has grown mostly because more businesses are moving out of spaces than are moving in, and that trend is expected to continue, real estate brokers and experts said.
Some predict the rate could grow to 27% in Glendale as entire floors of office buildings that are empty have not yet been put on the market because of unexpired leases.
“Unfortunately, Glendale suffered like a lot of other major markets have suffered,” Church said.
While Burbank has benefited from its proximity to the entertainment industry, which has kept most of its existing businesses in their offices, Glendale is home to many financial and insurance services firms that have slimmed down and moved out.
The Disney Store and Warner Bros. are two examples of companies that shut down Glendale offices and consolidated their operations elsewhere, said Bill Boyd, senior managing director of Charles Dunn Co. Inc. in Glendale.
At least 50,000 square feet of space is expected to be vacated over the next month because of businesses that have already shut down or are in the process of moving out, brokers said.
Still, they said the changes in Glendale were not a result of the city becoming less desirable.
“It has nothing to do with Glendale and everything to do with the economy and the nature of business,” Boyd said.
Some expected rents to decrease as property managers attempt to fill space.
An expected increase in Glendale’s vacancy rate, which was 19.1% in the fourth quarter of 2009, will mean less workers filling office towers and patronizing local businesses during the day.
Many of those businesses depend on foot traffic from office workers that are part of the Glendale’s daytime population and have raised concern among city officials who are scrambling to draw new tenants to area.
