Olson: Rancho Bernardo is a diverse market. Sony owns buildings; British Aerospace owns buildings; Northrop Grumman owns buildings. We have a lot of big corporations, and a lot of the multi-tenants users are supporting that big industry of technology and defense companies.

GlobeSt.com: What other markets experienced significant rent growth this cycle?

Olson: Mission Valley, which was in the final with Rancho Bernardo. After the downturn, Mission Valley took a big hit because there is a large density of real estate and finance companies. After the downturn, there were a lot of vacancies in the market, and you saw softening of rents as a result. Since then, the market has stabilized with single-digit vacancy rates and healthy rent growth. It is a desirable central submarket with access to the main freeways and the main workforce. We have seen that market attract a lot of demand. There is also little new construction in that market, and you have had compression in rents for that reason as well.

GlobeSt.com: Why do you think that the market, in general, has seen such little office development?

Olson: This cycle, San Diego has been more of a redevelopment cycle. So, we have seen a lot of people rebuilding a class-B projects. A lot of class-B properties have sold during this cycle. You have really seen a repurposing of older vintage product into new modern facilities, which obviously command higher rental rates. A lot of the recent rent growth has been seen in that market.

GlobeSt.com: This research looked at the last seven years. Looking ahead, do you think that rental rates this year will continue to grow?

Olson: With the current demand in the market and leasing activity in the market, I think we will continue to see positive rent growth through the end of the year. There is not much new construction and the repurposing of product and improving second-generation buildings, you are going to see a continual trend of rent growth to justify that. In addition, high construction costs for tenant improvements and high construction costs for redevelopment of buildings is also factoring into continued rent growth.