After posting record or near-record first-quarter net absorption for the past four years--an average of 975,000 sf--industrial and R&D markets felt the dual sting of a slowing national economy and decisions by companies to postpone their expansion plans, says Mike Philbin, director of transactional services for Burnham.
The industrial figures follow a similarly dismal showing by the county's office markets in the first quarter. But officials are inclined to look on the bright side, at least for now.
"It is important to note that this slowing follows four years of truly exceptional performance," Philbin says. "If annualized, the first quarter's net absorption would equate to nearly one million sf of net absorption--a still very respectable amount of activity."
Fortunately, new construction also has slowed, easing fears that large blocks of unabsorbed space will glut the market. The Burnham study shows that just 1.2 million sf of new industrial and R&D space was completed during the first three months of the year. This compares to an annual average of 5.8 million sf of newly completed construction since 1996, and to the county's all-time peak year of 1999 when 9.7 million sf of new space came on line.
"Although most companies and major developers/owners are more cautious in today's economic climate, they realize that, unlike the early 1990s, the San Diego County industrial and R&D markets are not overbuilt," Philbin says. "Essentially, net absorption offset most of the impact of new construction, and the effect on vacancy was minimal."
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