The Burbank office market is having a moment. Investors are showing an increasing interest in the market, and the market is positioned for growth. Now, the Connexion Burbank, a three-building 337,904-square-foot office building in Burbank has traded hands for $123.5 million between a joint venture of Lincoln Property Co. and Angelo Gordon and Intercontinental Real Estate Group. The property is a gem at 91% occupancy and a recent $8 million renovation, plus it shows strong upside potential—but it is also another example of the growth in the Burbank market.

“Investor interest was strong on this asset,” Kevin Shannon, co-head of US capital markets at Newmark Knight Frank. “Its Downtown Burbank location offered a mini CBD feel in contrast to the Media District. The walkable amenities and smaller multi-tenant floor plates were appealing to potential buyers as well. Much of Burbank's inventory is dominated by large tenants and many are single tenant.” Shannon, senior managing director Rob Hannan and managing directors Michael Moll and Laura Stumm represented the seller, along with Kent Handleman of Lincoln Property Co. and Doug Marlow of CBRE who served as local market leasing advisors in the sale. The buyer was self-represented.

While the property recently underwent a renovation, there is some upside to be made through more improvements that could help drive occupancy. “There is still additional upside for the asset by finishing some of the common area work on several floors, leasing the vacancies and rolling below market existing rents to market,” says Shannon.

The Burbank market is benefitting from what Shannon calls the Blackstone Effect, surge generated by a recent investment from the Blackstone Group. “Capital is anticipating that market rents in Burbank will be pushed because of the Blackstone recapitalization of Worthe's massive Burbank portfolio,” says Shannon. “The consolidation of Worthe's various partners into the new Worthe/Blackstone partnership which controls approximately 50% of the Burbank Media District provides them with unique pricing leverage that other landlords in the market anticipate they will drafting off of. Existing landlords in Burbank believe the market will enjoy above average rent growth.”

As a result, the market is seeing increased investor interest and some interesting sales. In addition to this one, the Dreamworks Headquarters also traded hands for $290 million late last year in a deal also brokered by Shannon's team. “We are seeing increased investment interest in Burbank and the Tri-Cities generally,” says Shannon. “Our team's $290 million sale of the DreamWorks HQ and the Blackstone recap were major market transactions prior to this sale. There would be more investment sales activity but there is a lack of product in Burbank currently.”

Shannon expects the market to continue to grow as the Worthe recapitalization drives rents up. “Generally, markets are doing well where there are technology, entertainment and content creation tenants, and Burbank is no exception,” he adds. “The current healthy vacancy rate of approximately 9.4% is forecast to get much tighter based on historical absorption. There will be very limited new construction coming to market in the near term although new spec construction looks to be warranted.”

Instant Insights /

Investors Find Upside in Burbank Office

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