A Los Angeles developer has begun construction on a speculative $55-million office building in Pasadena, a show of confidence that the office vacancies rate will continue to shrink as the housing sector grows.
The six-story project at the southwest corner of Lake Avenue and Walnut Street, called Crown City Center, is being built by Investment Development Services Inc. in one of the city's most popular commercial districts.
The developer has yet to sign any tenants to occupy the 230,000-square-foot building. Pasadena's recent wave of apartment and retail construction helped convince Investment Development that a speculative commercial project was worth the risk. The nearby Gold Line rail stop that opened last year also helped.
"We felt the time was right for an office," said David Mgrublian, the firm's managing director.
The city has issued permits for more than 1,600 housing units in the central district since 2000, Planning Manager John Poindexter said.
Housing has proven so popular that Champion Development, the developer of a four-story building at Lake Avenue and Cordova Street, changed plans last year after the steel frame was completed and converted two floors of office space into residential condominiums.
The $21-million Pasadena Collection East, as that building is known, will open this month with 90% of the remaining office floor sold or under contract, said real estate broker Doug Marlow of CB Richard Ellis, who represents the property. Champion has been asking for $290 a square foot for the office space.
The 38 condominiums in the building and the 72 condominiums in the adjacent $15.4-million Residences at Pasadena Collection West that will be completed next month are 100% reserved, a Champion representative said.
The Pasadena office vacancy rate, including sublease space, fell from more than 15% at the end of 2002 to 12.8% at the end of last year, according to brokerage Cushman & Wakefield. Developers generally don't want to build speculative buildings unless vacancy in the market is less than 10%.
That might happen fairly soon, Marlow said.
"When the market turns" to favor landlords instead of tenants, "it's going to turn quickly," he said. "When demand comes back, there's not going to be a lot of supply."
Speculative office construction was common in Southern California during the 1980s and early 1990s, but has been rare since the real estate collapse that followed that boom.
Crown City Center won't be completed until April 2005, Mgrublian said. The L-shaped building, designed by Los Angeles architecture firm Langdon Wilson, will be distinguished by a tower-corner design that will provide its main entry and identity.
Investment Development also is building the Conejo Spectrum office project in Thousand Oaks and recently completed the Westlake North office building in Westlake.
Another large office building was recently completed on Colorado Boulevard in Pasadena. The second phase of Plaza Las Fuentes was 70% leased to Western Asset Management before construction began by developer Maguire Properties of Los Angeles.
The 250,000-square-foot building at Euclid Avenue is 76% occupied and known as Western Asset Plaza, spokeswoman Peggy Moretti said. Other tenants include engineering firm Saifu/Bouquet and Bank of America.