SAN DIEGO, CA-San Diego County's office market wrapped up 2002 on a positive note, as the region posted a strong fourth quarter performance, according to a recent report by Burnham Real Estate Services.

Burnham's research shows that fourth quarter net absorption stood at 627,000 sf. Total 2002 net office absorption was 1.6 million sf, outpacing the previous year's figure of one million sf.

“Biotech clearly drove the office market in 2002,” says Mark Wayne, a senior vice president with Burnham. “In 2003, however, a decline in the amount of venture capital in the biotech sector will likely cause some companies to scale back and others to vacate. This could cause the overall net absorption in 2003 to fall short of that achieved in 2002.”

Sales prices, however, are expected to climb in the upcoming year, as investor demand for San Diego office product shows no signs of cooling. Burnham attributes the appeal to the region's limited supply of land, a diversified economy and strong population growth.

Vacancy rates, which rose only slightly to 12.6% in 2002, are expected to remain steady over the upcoming year. “A decline in demand for space will be offset by the fact that there will be very little new inventory coming on line,” Wayne says. “This will help keep the vacancy rate relatively stable even if net absorption tapers off a bit.”

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