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San Diego Office Market Shows Softening

SAN DIEGO-First quarter shows negative absorption approaching 320,000 square feet. CBRE predicts availabilities will climb to 24.5% by mid 2011.

By John McCloud | Updated on April 29, 2009

SAN DIEGO-With tenant activity weak and companies continuing to downsize, the San Diego County office market saw vacancies rise and rents fall in Q1. Reports from both Grubb & Ellis, Cushman & Wakefield and CB Richard Ellis all predict the market will continue to soften through the remainder of the year and well into 2010, possibly even longer.

Both Cushman & Wakefield and Grubb & Ellis show negative absorption between 315,000 square feet and 320,000 square feet for the quarter. According to the former, office vacancies stand at 15.3%, up from 12.3% a year ago, while direct asking rental rates average $2.55 a square foot, down from $2.73 a square foot in March 2008. The latter pegs vacancies even higher at 16.8% but also has rents higher at $2.65 a square foot. CBRE puts availabilities, which include sublease space and space scheduled to come vacant as well as currently vacant space, at 18.7%. The brokerage predicts availabilities will continue climbing for 18 months, peaking at 24.5% in mid 2011.

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