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BUSINESS SPOTLIGHT:Vacancies remain low in the city

Studios appear to fuel the appetite for office space. The rate now at just 3.6%, much lower than elsewhere.

February 14, 2007|By Chris Wiebe

The demand for office space in Burbank is strong, even as vacancy rates in neighboring Glendale are soaring to heights far above those in the rest of Los Angeles County.

Last week real-estate firm Grubb & Ellis released a report showing that in January there was 1 million square feet of open office space in Glendale, translating to a vacancy rate of 16%, which is well above the county's 9.4% average.

But in Burbank — where the entertainment industry has long provided the foundation of the business landscape — the market is maintaining a tight 3.6% vacancy rate, which is almost two-thirds of the county average, said Jack Kyser, the Los Angeles County Economic Development Corp.'s chief economist.

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"Burbank is at a very, very tight rate," he said.

"I would say it has to do with entertainment because there is still growth there."

With studios such as ABC, NBC and the Disney Corp., Burbank provides a diverse economic make-up for large businesses, said Larry Auzene, who was president of the Burbank Assn. of Realtors in 2006.

"We have a really centralized area with all types of large businesses," he said. "People are eager to have their business here because we have so much that goes on here. And I don't think Glendale has quite the diversity that we have, nor the concentration of big businesses … and because of that we don't have the vacancy factor that Glendale has."

Juxtaposing Southern California's business real-estate offerings with the residential market makes for an interesting economic climate, Kyser said.

"You have some very strange disconnects going on in the real-estate market," he said.

"The office market is tight and getting tighter … yet you have a shortage in affordable housing."

Developers are even eyeing industrial sites, with plans of converting them into residential units, he added.

A two-year-old Economic Development Corp. study showed a shortfall of 240,000 housing units in Los Angeles County, notably housing that would fit in the price range of middle-class buyers, he said.

In Burbank, median home prices exceed even towering San Fernando Valley averages by 11%, making home ownership difficult, said Rep. Brad Sherman, who was behind a Census Bureau survey that specifically targeted the valley.

Scarcity of land for development in Los Angeles and neighboring cities drives up prices, along with sharp increases in construction costs, Kyser said. And increased population density, a natural consequence of diminishing available land, is something that many people do not like to consider, he added.

"We're running out of land in the urban core of Los Angeles," he said. "And we have to look at every piece of land in a different way and think of the long term of economic heath in California."

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