JLL’s 4th Quarter San Diego Office Highlights, Insight and Market Statistics Report confirms the office market is stabilizing and gradually strengthening as we head into 2014.
According to JLL’s 4th Quarter Office Statistics Report, San Diego’s office market fundamentals remained relatively flat over the 4th quarter with direct vacancy rates experiencing an incremental dip to 13.8 percent while overall vacancy was 14.6%. Rents countywide are hovering around $2.17 per square foot full service gross per month, with marginal increases seen in Class A and B projects year-to-date.
Leasing activity was down countywide, but the downtown submarket experienced a surge of activity late in the year. Downtown had a disproportionately larger share of total leasing activity countywide at 21 percent compared to 15 percent of the county’s total rentable building area. This was due in large part to the 300,000 square foot Sempra deal last quarter and a number of large tenants extending their lease in the CBD including Arrowhead Insurance, ESET, and Littler Mendelson. Downtown also had the County’s largest direct net absorption for Class A space this quarter at 119,579 square feet.
Submarkets like UTC and Mission Valley continue to outperform the rest of the market, with UTC seeing the County’s lowest direct vacancy rate at 6.6 percent. In fact, in both submarkets the direct vacancy rate has consistently decreased over the past 14 quarters from a high of 25.8 percent in UTC and 18.8 percent in Mission Valley in the second quarter of 2010. These vacancy decreases have in turn pushed asking rents, especially for Class A space.
JLL’s 4th Quarter Office Insight Report cites limited construction and continued employment growth coupled with the incremental dip in vacancy and the slight increase in rental rates as positive indicators of office market improvement heading in to 2014.
In spite of political and economic uncertainties, the San Diego office market continues on its road to recovery. Leasing activity is expected to increase over the next year due in part to the growing demand of tenants in the technology industry and projected employment growth in other traditional office-using industries, such as Professional and Business Services.
You can read about 4th quarter key highlights in the San Diego office market in JLL’s 4th Quarter Office Highlights Report.
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