Burbank Leads Tri-Cities To Strong End Of 2016
The market rebounded this quarter with positive demand after two straight quarters of negative absorption. Vacancy likewise dropped as 2 major move-ins in Burbank filled large chunks of vacant space. Strong leasing activity in the three core markets of Burbank, Glendale and Pasadena and a gradual rise in rents still indicates overall confidence in the market.
Four of the five submarkets saw increases in rates, leading to a net gain of $0.04 PSF monthly overall. Investment activity stayed steady with 3 major sales occurring, spread throughout the Tri-Cities. For investors, sizable discount to replacement cost and rents below peak levels are helping to fuel activity, along with a varied tenant base for the market.
The Tri-Cities office market saw vacancy decrease from 14.2% to 13.0%, the largest decrease since third quarter of 2015. Absorption recorded a robust positive 266,300 SF, with Burbank being the primary driver.
Rents continued to ascend, landing at an average monthly asking rate of $2.92 per square foot (PSF) Full Service Gross (FSG). Up 3.1% year-over-year, this marks ten straight quarters of increases.
Leasing activity in the Tri-Cities recorded 637,400 square feet (SF), up 74.1% from last quarter’s total of 366,100 SF.
There were no new construction deliveries this quarter, and there are no new projects currently under construction.
Investment activity continued with momentum in the fourth quarter. The largest transaction was Beacon Capital Partners acquiring 101 N. Brand Blvd. in Glendale from Prudential Financial, Inc. for $128.3 million.
The Tri-Cities market continues to be an attractive market for tenants from a variety of industries. Large blocks of space still remain in some of the core submarkets, such as Pasadena and Burbank, at a price discount relative to other markets in the Greater Los Angeles region. It is expected that the Tri-Cities market will remain relatively insulated against large shifts in the market due to a combination of modest tenant demand and a scarcity of new available construction. While the outlook remains positive overall, it should be noted that the Tri-Cities market is not seeing the types of gains in rental rate velocity nor demand it saw in 2015 and 2016.