Several Tri-Cities deals delayed; quarter's biggest deal falls apart.

The Tri-Cities office market played a "survivor" role during the first quarter of 1993, as CB Commercial Real Estate Group Vice President Boyd Smith put it. Even though several pending lease transactions have been delayed -- and the biggest one seems to have gotten away -- office vacancies continue to tighten slowly in Pasadena, Glendale and Burbank.

And, although several of the delayed deals are expected to close during the second and third quarters, landlords will keep calling on their survival skills as some important tenants downsize or disappear, according to Boyd and other commercial property professionals.

"There are definitely a lot of people looking seriously" at available Tri-Cities office space, said Pat Church, office properties specialist at Grubb & Ellis Co. "Unfortunately, few deals were actually inked during the first quarter," he lamented.

"Everyone is very slow to make a commitment" amid today's uncertain economic environment, added Chris Stirling, vice president with Homart Development Corp., developer of the Glendale City Center office project.

The big Tri-Cities deal that market insiders had been anticipating -- the one that got away during the quarter -- was Unihealth America's tentative 80,000-square-foot commitment. The health care giant had given a "handshake" agreement first to move to the proposed NBC Plaza project in Burbank. But that major office project was tabled indefinitely when its developer, Cushman Investment & Development Corp., relinquished the site to the project's lender last December.

A subsequent lease at Glendale City Center was "out for signature" when Unihealth put the deal on hold for another year or two after a management reshuffling, several sources noted. In early April, the big tenant suddenly announced it was back in the market for 90,000 square feet. But most sources said they expect Unihealth to ultimately choose an Orange County location, nearer to its new chief executive officer's residence.

As Smith of CB Commercial noted, the Unihealth story highlights a frustrating dilemma facing would-be developers even in Southern California's healthier office markets -- a category for which Tri-Cities qualifies.

Developers can't get construction financing without substantial "prelease" commitments from creditworthy anchor tenants. But in the wake of the NBC Plaza fallout, Unihealth has indicated it won't sign on with any development lacking firm financing commitments, Boyd explained.

With the long Tri-Cities construction drought continuing, the near-term survival prospects of Tri-Cities' existing landlords seem solid -- assuming most of the pending deals close. However, some will have to survive expected ongoing consolidations and relocations of tenants, such as Lockheed Corp., Bank of America/Security Pacific Corp., IBM Corp. and others.

Smith predicted that downsizings of "large users such as these will affect all the Tri-Cities submarkets."

Considering the counterweight the market's shrinking base of pre-existing tenants represents, insiders aren't expecting major proposed "Class A" office properties to get under way any time soon.

But Cushman Realty Corp. Senior Broker R. Todd Doney said he foresees strong demand for some more-affordable "low-rise" properties now undergoing major renovations. A 102,000-square-foot Cabot Partners project now undergoing renovation on Hollywood Way in Burbank is about to re-enter the market, followed by Mutual of New York's pair of properties in the Hastings Ranch district of Pasadena's "technology corridor," Doney added.

Noting that Pasadena's 5.5 million-square-foot office market has a vacancy rate of about 14 percent, CB's Smith said about 90,000 square feet worth of leases are awaiting tenant signatures.

Cushman & Wakefield broker Drew Planting indicated that the Pasadena office market has "stabilized" in the wake of the big tenants' departures, and that only two properties -- Ameron Center and 790 E. Colorado -- have large blocks of contiguous space available.

As for Glendale, Homart's Stirling said pending office lease deals in that submarket cover perhaps 150,000 square feet. "It could be a great second quarter after a quiet first," the developer elaborated. Larger tenants expected to relocate or expand soon in Glendale include Disney Stores and insurance broker Willis Coroon.

With Security Pacific and certain Walt Disney Co. divisions putting space back on the Glendale office submarket, however, several properties are likely to be stuck with empty spaces. Glendale City Center now has more than 200,000 square feet available, and the 330 N. Brand building is expected to have about 170,000.

Smith, adding that Glendale's 4.4 million-square-foot office market is 14 percent vacant, detailed the first quarter's "most aggressive" office lease, Stewart Title's 25,000-square-foot renewal at Shuwa Investments' 505 N. Brand. The deal specified "full service gross" monthly rent of $1.50 per square foot, new space improvement allowances totaling $20 per foot and four parking spaces per 1,000 square feet of rented space at $25 each monthly.

Meanwhile, over in Burbank, that 3.3 million-square-foot office submarket posted a 6 percent vacancy factor for the first quarter, according to CB Commercial's calculations, which explains the absence of major activity there in the first quarter. Brokers mentioned the 35,000-square-foot lease at 3500 W. Olive to Warner Brothers Stores as the biggest first-quarter lease in Burbank.

The 434,000-square-foot Studio Plaza highrise in Burbank's Media District garnered much of the early-year discussions. Sony Pictures Entertainment Corp. is planning to relocate 200,000 square feet of operations from the property to its Culver City lot this June, Planting and others noted. And the movie-maker's former parent, Coca-Cola Co., is in the process of selling the property, brokers confirmed.

While Sony's pending departure is expected to put a substantial hole in the market, Planting said Disney stands to "stabilize" the situation, taking as much as 175,000 square feet of Burbank office space as various leases there expire.

A broker also noted that Coast Federal Bank is negotiating to become a 200,000-square-foot "build-to-suit" tenant, joining the planned Altium headquarters, at the proposed Burbank Airport Center.