Burbank, Glendale office projects start construction.

The Tri-Cities region of Burbank, Glendale and Pasadena recorded a major breakthrough in the third quarter, as L.A. County's first major office developments in over five years broke ground in Glendale and Burbank.

Hot on the heels of two big office complexes already under construction are two other major office projects in Burbank, which could both start construction by year-end.

Not much further behind are a handful of other office and retail projects that will likely break ground in 1998.

Driving the explosion of new office construction is the Tri-Cities' ultra-low vacancy rate, coupled with an abundance of capital in Los Angeles looking for suitable new real estate projects to fund.

The Tri-Cities vacancy rate continued to be the lowest of any L.A. County submarket in the third quarter, finishing the period at 7.4 percent vs. 7.7 percent in the second quarter, according to Grubb & Ellis Co.

Burbank led the three cities with an office vacancy rate of 4.1 percent, up slightly from a second quarter rate of 3.8 percent. Pasadena came in second with an office vacancy rate of 7.3 percent, and Glendale posted a rate of 7.4 percent.

Such low vacancies have financiers and developers scrambling to identify new development sites to meet the growing demand for space.

First out of the gate were PacTen Partners and Morgan Stanley & Co., which broke ground on a 24-story office tower at 655 N. Central Ave. The 500,000-square-foot building could be completed around summer 1999.

The PacTen project was followed by another ground breaking in late September on a 215,000-square-foot, five-story office building in north Burbank near Burbank Airport. The building, being developed by M. David Paul and Associates, is slated for completion in fall 1998, said company spokesman Jeff Worth.

The M. David Paul building is one phase of an eventual office campus that could contain up to 1.2 million square feet of space at the corner of Olive and Alameda avenues. The campus is being built on land purchased this year and last year from the city of Burbank, and may eventually include another three acres of adjacent land that M. David Paul is negotiating to buy from Lockheed Martin Corp., said Worth.

Close behind the PacTen and M. David Paul buildings is a project being developed by J.H. Snyder Co. Late last month, Snyder signed a deal with Beacon Properties Corp., a real estate investment trust, whereby Beacon would finance construction of a six-story, 585,000-square-foot office complex at the corner of Alameda Avenue and Buena Vista Street in Burbank's popular Media District.

The deal with Beacon means the $140 million project can now break ground as early as next month, said J.H. Snyder partner Cliff Goldstein.

Office space in the Snyder project will lease for annual rates of $34 to $37 per square foot, making it the most expensive office rental property in the Tri-Cities, Goldstein said. The priciest buildings in Burbank currently command rents of about $34 per square foot, he added.

Goldstein said he is confident that rising rents in Burbank and Glendale will pull the rate for premium space up to J.H. Snyder's asking levels by the time the project is finished in the fourth quarter of 1999.

Also moving closer to ground-breaking in the third quarter was the second phase of Glendale City Center at 111 N. Brand Blvd. Project designs are being reviewed by Glendale city officials, and, pending their approval, construction could begin on the 360,000-square-foot office building in the next six to eight months, said Bill Boyd, senior vice president in the Glendale office of CB Commercial Real Estate Group. If approved, the project could be completed as early as the summer of 1999, Boyd said.

Meanwhile, the city of Burbank moved closer to final agreement with developer Vestar Development Co. on a usage and development plan for 102 acres owned by Vestar in the northern part of the city near Burbank Airport.

Vestar wanted to build a mixed-use development with an emphasis on retail space at the site, while Burbank favored mixed-use with an emphasis on office space.

After months of talks, the two sides are close to an agreement that would see Vestar develop 580,000 square feet of retail space, up to I million square feet of office space and six acres of "transitional use" space, which could include developments such as hotels or recreational venues such as a skating rink, said Burbank City Manager Bud Ovrom.

Outside those major developments, only a trickle of leasing activity and building sales occurred in the Tri-Cities during the third quarter.

The absence of major leases is due to the shortage of large blocks of empty space, especially in Burbank and Glendale. Meanwhile, building sales are slow because many Tri-Cities landlords expect rising rents and new development in the market to drive up the value of their buildings.

The handful of major third-quarter leases and building sales in the Tri-Cities took place in Pasadena, where vacancies are still sufficiently high to keep rents down and put a damper on new office development over the near term.

The quarter's biggest lease deal came from Jacobs Engineering Group Inc., which took 75,000 square feet of office space at 1111 Arroyo Parkway, said Todd Doney, vice president in the downtown L.A. office of Cushman Realty Corp. However, Jacobs will also vacate 200,000 square feet of space at 251 S. Lake Ave. at the end of this year, Doney added.

Pasadena also recorded three major building sales in the third quarter, Doney said. They were: Spieker Properties' purchase of the 160,000-square-foot building at 3280 Foothill Blvd. for $19.3 million: Spieker's purchase of the 130,000-square-foot building at 790 Colorado Blvd., also for $19.3 million; and Layton/Belling's purchase of the building at 150 E. Colorado Blvd. for $7 million.

Major Events

* PacTen Partners and Morgan Stanley & Co. break ground on a 24-story, 500,000-square-foot office tower in Glendale, the first major new office project in L.A. County for over five years.

* M. David Paul arid Associates breaks ground on a 215,000-square-foot office building in northern Burbank, part of an eventual office campus with up to 1.2 million feet of space.

* J.H. Snyder Co. signs a deal with Beacon Properties to develop a six-story, 585,000-square-foot office complex in Burbank's Media District. The project could break ground next month.

* Designs for Glendale City Center II go to Glendale city officials for approval. Groundbreaking on the 360,000-square-foot office project could come in the first or second quarter of 1998.

* Vestar Development Co. and the city of Burbank near agreement on development plans for 102 acres of land owned by Vestar in north Burbank. Development on the site could include 580,000 square feet of retail space and up to 1 million square feet of office.

* Glendale city officials narrow the field of bidders to redevelop land at 800 N. Central Ave. to two. One finalist proposes a 375,000-square-foot office tower, while the other proposes a 425,000-square-foot office building.

* Walt Disney Co. submits plans to the city of Burbank for a new 10-story, 380,000-square-foot building on its studio lot. The building would be part of Disney's master plan development approved by the city in 1992.

* Entertainment Partners nears completion of a 100,000-square-foot building on Naomi Street and Glenoaks Boulevard. The building would be owner-occupied.