Warner Bros. to Lease New Building

An affiliate of Time Warner Inc. has agreed to lease an entire office building under construction in Burbank in a 15-year deal valued at more than $100 million.

Warner Bros. Entertainment will move out of 150,000 square feet of space that the movie and television company leases in Glendale and owns at its crowded Burbank studio into the second phase of the Pinnacle, a 235,000-square-foot project being built at 3300 W. Olive Ave. Construction is expected to be completed by the end of the year.

Santa Monica developer M. David Paul Development announced two years ago that it would build an addition to the Pinnacle after the first phase at 3400 W. Olive, completed in 2002, quickly leased. Most of the tenants, including Warner Music Group Corp., NBC Enterprises, Clear Channel Broadcasting, Sony Pictures and Bravo Cable Network, are in the entertainment industry, said Jeff Worthe, a principal at M. David Paul.

The builder, with financing from Stockbridge Capital Partners, started the second phase without a lessee waiting in the wings. Speculative development has been rare in Los Angeles County since the early 1990s, when demand for office space collapsed. But Burbank’s Media District is a popular market hemmed in by studios, neighborhoods and the Ventura Freeway, said broker Carl Muhlstein of Cushman & Wakefield.

Warner’s agreement lowers vacancy in the 3.5-million-square-foot Burbank Media District to 5.6%, Muhlstein said, less than half the county’s average and below that of the Santa Monica market, where the vacancy rate is 6.8%. Rents in the area averaged $2.74 per square foot per month at the end of last quarter, about the same as a year ago. Office rents countywide were flat at $2.07.

Muhlstein represented the landlord in the Warner lease while Matt Hargrove, also of Cushman & Wakefield, represented the tenant.