San Diego managing director Jay Alexander recently sat in on a Daily Transcript round table discussion with nine other commercial real estate leaders to talk about the status of San Diego County’s commercial real estate market.
As a group, everyone was generally upbeat about the coming year, but there are areas of concern. All agreed that there is no shortage of capital to acquire commercial properties, but as Alexander stressed,
“Capital isn’t the problem. The opportunity for capital is the problem.”
The consensus is that things are opening up a bit, but the deals are smaller and there won’t be as many good deals. Class A vacancy rates in many submarkets are declining, which will encourage new development, and that is a welcomed sign. The participants also pointed out that many older buildings are going to need to be repositioned to compete successfully.
“If you reposition these buildings with new systems and other upgrades, you can get more rent,” Alexander noted.
He went on to explain that rents are going to need to climb in areas like Rancho Bernardo before we’ll see new speculative construction.
“You can rent space in RB for about $2.46 per square foot. This needs to climb at least another dollar before you can justify new construction…and development isn’t getting any cheaper.”
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