SAN DIEGO—Rising rents and falling unemployment rates are indicating mid-year improvements for the San Diego office market. This according to a second-quarter report from JLL.
The report predicts that this will bode well for the rest of the year:
The San Diego economy continues to add jobs with unemployment dropping to its lowest level in almost seven years. This steady job growth, especially in office-using employment, points to continued demand for office space in the future.
Unemployment in San Diego has fallen to 4.9% JLL says. Total non-farm jobs were up 42,000, or 3.1%, over the year, the report states.
Professional and business services recorded the greatest year-over-year gain, adding 11,000 jobs. Professional, scientific, and technical services contributed to more than 75% of the job growth in this sector.
Meanwhile rents continue a steady climb, with 5% percent increase year-over-year as the supply of large blocks and high-end class A space continued to decline. As class A space becomes more scarce, class B assets are beginning to benefit from the spillover demand. Rent for class B space experienced larger growth quarter-over-quarter compared to class A space, 1.2% versus 0.8%, respectively. Class B assets with sought-after amenities and strategic location will benefit the most from this spillover demand.
Over a million square feet of new office space by 2016
While space is tightening, that dynamic will soon change, JLL notes.
One build-to-suit project and five speculative projects totaling 1,000,201 square feet are set to deliver by 2016. Of this total, nearly 940,000 square feet will be complete by the end of this year. There has been little to no speculative construction in the past three years. With class A direct vacancy at its lowest level (10.7%) since 2005, the new construction will help alleviate the supply-constrained market.
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David Phillips
David Phillips is a Chicago-based freelance writer and consultant with more than 20 years experience in business and community news. He also has extensive reporting experience in the food manufacturing industry for national trade publications.
