Part 1 of 2
SAN DIEGO—A lot can be said about the San Diego office market in 2014. Demand and vacancy are the best they have been since 2005 and 2006, respectively. That is according to a recent Colliers office report for the region.
According to the report, the countywide average asking rental rate across all classes continues to trend upward for a 12th consecutive quarter. Even newly constructed space is at its highest level in last five years. All these positive metrics, the firm says, point to an even better 2015 that will rival the best years prior to the “great recession.”
The November 2014 San Diego County unemployment rate measured 5.8%, which remained unchanged from October. The California rate increased to 7.1% (+0.1%) while the national rate stayed flat at 5.5%. As of August 2014, San Diego County experienced a year-over-year increase in non-farm employment totaling 43,000 jobs. The combined industry sectors of “Professional and Business Services” and “Financial Activities” – the two predominant office-utilizing employment sectors – posted a net increase of approximately 12,500 jobs over the same period.
According to the report, countywide demand in Q4 2014 totaled a positive 486,918 square feet of net absorption. This was a sizable improvement over the 321,168 square feet of positive net absorption in the prior quarter. The class B office segment saw the most demand during the quarter with 364,631 square feet of net absorption. The class A inventory recorded 75,411 square feet of positive net absorption while the class C market gained 46,876 square feet.
Tim Cowden, SVP of the firm, tells GlobeSt.com that a number of office buildings purchased in the 2008 to 2013 time-frame are now being sold for much higher prices. “Today's market has a lot of institutional money chasing a limited number of transactions leading to bidding up of prices.”
Check back for part 2 of this report, where we discussed the region's challenges, and review what's in store for vacancy and new supply.
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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.
