Tri-Cities Begins 2019 With Positive Demand
- Momentum from the end of 2018 spilled over into 2019 as overall vacancy in the Tri-Cities office market further tightened from 12.9% to 12.4% to end the year. Absorption recorded positive 93,700 square feet due to move-ins in Pasadena and Burbank.
- The average monthly asking rate increased to $3.16 per square foot (PSF) full service gross (FSG), surpassing the pre-recession high of $3.13 in mid-2008.
- The market posted its second highest level of leasing activity since the beginning of 2017, recording 543,600 square feet, the majority of which came from Pasadena and Glendale.
- Progress on Lincoln Property Company's AMLI mixed-use project in Pasadena continued. The project will feature 200,000 square feet of office space in its first phase.
- Late fourth-quarter activity featured 70 S. Lake Avenue in Pasadena trading from Alliance Bernstein to Jade Enterprises for $44 million ($378 PSF).
The momentum of late 2018 carried into 2019 as the Tri-Cities market recorded positive demand (93,700 square feet) for the third time in four quarters. While Warner Music Group's exit from Burbank looms, substantial leasing velocity in Pasadena and Glendale should help buoy vacancy throughout the year as those spaces are absorbed. Rental rate growth increased for the second consecutive quarter, posting positive growth of 3.7%.
The Tri-Cities market continues to be an attractive market for tenants from a variety of industries. Large blocks of space remain in some of the core submarkets, such as Glendale and Burbank, at a discounted price relative to other markets in the Greater Los Angeles region. While there are larger tenants exploring those space options, small and medium spaces will continue to constitute the majority of demand in the near future, as the Pasadena submarket has seen of late. Warner Music Group's imminent exit from Burbank will be balanced by transactions from the last few quarters, such as Service Titan, Bluebeam and DNEG.