Tri-Cities office vacancy rate so low that aspiring tenants look elsewhere.

The question on everyone's lips in the Tri-Cities market of Burbank, Glendale and Pasadena is: Where will large office tenants who want to move to the Tri-Cities go?

In all three submarkets, there is a real lack of large blocks of office space.

"If somebody wants 150,000 square feet in Glendale, there is not much to choose from," said Laura O'Brien, a broker with CB Commercial Real Estate Group Inc.

David Kluth, a broker with brokerage firm Julien J. Studley Inc., said the almost 90,000 square feet that Hertz leased last month in Pasadena was "one of the few large blocks of space left in Pasadena."

Burbank's Media District has very little office space left at all, much less available contiguous space for large tenants. Uni-Health America, according to O'Brien, is in final lease negotiations to move into Studio Plaza in Burbank. That possible move would take another 80,000 square feet off the market in the already tight Media District.

"The vacancy rate in the Media District is so low it might as well be at zero," said Bill Boyd, a broker with CB Commercial.

In fact, even areas of Burbank outside the city's popular Media District are scarce on large blocks of space. Carl Muhlstein, an independent broker who specializes in representing entertainment tenants, said the largest block of available space in all of Burbank is probably no larger than 40,000 square feet

This puts brokers working in the Tri-Cities area in a difficult position. According to several real estate sources, a number of large users are hoping to move to the area, but are finding their options limited.

O'Brien is representing a company hoping to consolidate operations now housed a four different locations in Burbank and North Hollywood. However, the space needed to accomplish that consolidation is large -- approximately 100,000 squar feet.

They would like to go to Burbank, she said, but finding that amount of space is going to be difficult. O'Brien also said the company, All Post, a post-production service company, would consider relocating to a build-to-suit, but several brokers pointed out that option might be more expensive than simply looking in other markets.

Another larger tenant, Maxicare Health Plans Inc., expressed an interest early in 1994 in moving to the Tri-Cities, according to broker Boyd. That company was looking for something in the range of 150,000 square feet. Boyd said Maxicare i unlikely to find that amount of space immediately available, so it has moved it search to other areas of the county.

The areas most likely to benefit from the Tri-Cities' shortage of available space are Woodland Hills and downtown Los Angeles.

While the Tri-Cities' low office vacancy rate may be disappointing some large tenants, landlords in the market will likely enjoy improved rental rates, which have been on the soft side in recent years. Todd Doney, a broker with Cushman Realty Corp., said future lease deals in Pasadena will likely include fewer tenant improvements and less free rent. O'Brien added, however, that "it will take a little while for stabilization of rents. They may start to firm up next year."

At 9.5 percent, Burbank's office vacancy rate was one of the lowest in Los Angeles County as of the end of the second quarter. A total of 31,515 square feet of Burbank office space was "absorbed" during the three months ended June 30, according to CB Commercial. Simply, that means 31,515 more square feet of office space was leased than vacated during the quarter.

"Burbank has benefited and continues to benefit from the growth of the entertainment market," said O'Brien. "That (entertainment growth) has flopped over into Glendale."

Glendale leasing representatives were indeed busy last quarter. Glendale absorbed office space to the tune of 101,140 square feet last quarter. That brought Glendale's office vacancy rate down to 13.1 percent.

Glendale recorded a pair of large leases during the quarter. Imperial Thrift & Loan Association moved out of Burbank and leased about 23,500 square feet at th 700 N. Central Tower in Glendale. ASI Market Research also moved out of Burbank to Glendale. That company was in the Media District at 2600 W. Olive Ave., but leased 21,000 square feet at Glendale City Center last quarter.

News of a possible new real estate development in Glendale also surfaced during

the second quarter. The Business Journal reported that the Glendale Redevelopment Agency and JMB/Tolkin Partners expect to finalize a letter of intent to develop a $50 million retail/entertainment center in downtown Glendale. Ground-breaking on that project, known as the Glendale Marketplace, i tentatively scheduled for spring 1995.

The only Tri-Cities submarket that experienced a net loss of office tenants, or "negative net absorption," in the second quarter was Pasadena. Negative net absorption occurs when more space is vacated than leased in the period. Pasadena's negative net absorption of 19,068 square feet was most likely the result of more corporate downsizing, said Kluth.