SAN DIEGO-While the current economic recovery has been decidedly slower than other recent recoveries, the San Diego office market has been steadily improving over the last four straight years. With few new deliveries in the pipeline to apply upward pressure on vacancy, the market is stabilizing, says Voit Real Estate Services' Jerry Holdner.
The VP of market research says that “lease rates have risen, especially among class A offices in prime submarkets. “We should see an increase in leasing activity as many short-term deals come up for renewal.”
Unemployment rates, he says, have continued to trend downward since the peak in January 2010. The unemployment rate in the San Diego County was 7.4% in August 2013, down from a revised 7.8% in July 2013 and below the year-ago estimate of 9.2%. This compares with an unadjusted unemployment rate of 8.8% for California and 7.3% for the nation during the same period, he says. According to the State of California Employment Development Department, San Diego County gained 14,800 payroll jobs from August 2012 to August 2013– including 5,300 in educational and health services, 4,700 from leisure and hospitality, and 4,400 from professional and business services. Manufacturing recorded the greatest number of job losses, down 2,800 year-over-year. “As job creation continues and consumer confidence stabilizes, the office market will continue to recover.”
Jones Lang LaSalle EVP Richard Gonor weighed in, noting that he is seeing, albeit small, slow and steady gains. “The local unemployment rate has dropped and several industries are charting significant employment growth. However, the government shut down and healthcare uncertainty could affect some of the positive recovery we are seeing as tenants may choose to stay on the sidelines until the future becomes clearer.”
And as many of the top-performing suburban markets continue to tighten, Gonor adds, tenants are left with fewer options to meet their space needs. “Competition for class-A product remains high and with decreasing vacancies fueling rental rate increases, the opportunity for speculative development may be on the horizon.”
And according to a recent CBRE Econometric Advisors' report for the region, although Q3 was the 16th consecutive quarter of positive net absorption, fears of a potential war, lingering effects of sequestration, the Affordable Care Act, capital market uncertainties and political / budgetary intransigence that led to a government shutdown slowed many of the previous quarter's economic gains. “Nevertheless the market still produced a positive, yet relatively flat quarter. Average asking lease rates increased slightly to $2.23,” says the report.
And although the firm forecasts call for increased growth over the next five years,
Although CBRE Econometric Advisors forecasts call for increased growth, the tech industry is one of the office-using sectors which expect “significant” future growth. “Nationally, tech firms have added jobs five times faster than other industries. In San Diego, tech employment growth is accelerating as the sector begins to expand, growing at double the rate of the overall job market,” says CBRE Econometric Advisors.
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
