Tri-Cities' tenants tire of paying premium rents, landlords may have to lower prices.

The Tri-Cities commercial real estate market remained one of the healthiest in Los Angeles County during the third quarter, but rents appear to be slipping because not all businesses want to pay a premium for being there.

Mark Sullivan, managing director of the Corporate Services Group at Julien J. Studley Inc., said Tri-Cities is "still one of the most expensive real estate markets in Southern California."

However, Sullivan said, some of the non-entertainment companies that moved into the Burbank Media District years ago "now have expiring leases and have no compelling reason to stay in the Media District."

"For the tenants who do business in entertainment and related fields, it's worth the money to be there," Sullivan continued. "But for companies that don't have to be there, there's no reason to pay the premium for being in the Media District."

R. Todd Doney, senior broker at Cushman Realty Corp., agreed that the Tri-Cities market is "still very healthy." But the widespread availability of cheap space elsewhere and dwindling number of tenants shopping for new space are prompting Tri-Cities' landlords to sweeten their offers to keep their buildings occupied, he said.

"I think there may be some landlords who were somewhat unrealistic before who have now become more attuned to the realities of the market," Doney said. "Possibly they are attempting to increase the pace of leasing now that some of the buildings have been completed for a while. Another possibility is that, in view of the relatively light tenant traffic, landlords are more eager to make deals."

Doney continued, "Some landlords may also have expected the market to tighten before now. But they now realize it isn't going to tighten so quickly. So they have decided to make some deals under more-aggressive terms than they might have held out for a few months ago. But the deals still have to make economic sense, or they won't agree to them."

Sullivan said other factors affecting the Burbank area include Disney's decision to buy the building at 3800 Alameda St., Columbia Pictures' move to Culver City and uncertainty about when NBC Plaza will be built.

Disney already occupies 10 floors of the 3800 Alameda St. building, which means Disney is likely to expand within the building and unlikely to take space in other buildings in the market, Sullivan pointed out.

Columbia is planning to move from the 400,000-square-foot Studio Plaza office building it leases from the Coca-Cola Co., which is going to throw 400,000 square feet of office space onto the market, Sullivan added.

NBC Plaza, a proposed two-tower project that would eventually include 718,000 feet of office and retail space, has been targeted for a site across from NBC Studios in Burbank.

Sullivan said the net effect of these factors is that demand for office space during the next few years will probably be slightly less than had previously been anticipated.

"But overall, it is still a pretty good market compared with others," Sullivan asserted.

According to Laura O'Brien and Boyd Smith, office specialists at CB Commercial Real Estate Group, vacancies in the Tri-Cities range from 5.5 percent in Burbank to 14.8 percent in Pasadena and 18.6 percent in Glendale.

Smith noted that the vacancy rate is actually higher in Pasadena's Class A space (17.4 percent) than it is in the city's Class B space (12.2 percent).

He said the higher Class A vacancy is due to "a combination of newly completed space not yet leased, business firms downsizing or rightsizing, and price-conscious office users preferring to operate in older, less costly offices."

O'Brien and Smith pointed out, however, that tenants moving into the Pasadena submarket from the Wilshire Corridor could fill a substantial portion of that vacant space. Several large insurance companies are considering space on Lake Avenue, and that could account for at least 75,000 square feet of new leases this year, they said.

They noted that big deals already inked in Pasadena this year included insurance broker Alexander & Alexander consolidating its Southern California offices into 80,000 square feet at Pasadena Towers in June.

According to Doney, the Tri-Cities' attractiveness depends in large part on the size of the tenant.

"For the bigger blocks of space, it's more of a landlords' market because there are fewer of those big blocks available. But if you're a 5,000-square-foot tenant, there is a myriad of alternatives to consider," Doney said.

Another change Doney cited is that landlords, concerned with maintaining the values of their buildings, are now more aggressive in trying to get tenants to renew leases.

"They are approaching tenants a year or two before the lease expires and asking about renewing because they know that the values of buildings today are being calculated in terms of cash flow instead of anticipated appreciation, as they were during the 1980s," he explained. "Keeping tenants intact is important for maintaining the values of buildings," Doney said.

In the housing market, the Glendale Board of Realtors reported that home sales in that city for the six months ended Aug. 31. totaled 455, compared with 567 for the same period in 1991 and 462 in 1990.

The average sales price for a Glendale home was $297,800 during the six-month period, compared with $311,300 last year and $320,300 in 1990.

In Pasadena, the number of homes sold was 104 in August and 748 for the first eight months of this year, compared with 99 in August 1991 and 821 a year earlier.

The total dollar volume of Pasadena home sales was $33.9 million in August and $245.5 million for the first eight months of this year, vs. $36.2 million in August 1991 and $278 million for the eight-month period a year ago.

The average sales price of a Pasadena home fell to $326,119 in August, compared with $365,119 in August, compared with $365,178 in August 1991. For the first eight months of this year, the average home price declined to $328,174 from last year's $338,655.