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Partnership. Performance. FIRST QUARTER 2016 San Diego Office Market Report Avison Young - San Diego 4225 Executive Square, Suite 600 La Jolla, CA 92037 858.201.7070 www.avisonyoung.com
Partnership. Performance.
FIRST QUARTER 2016
San Diego Office Market Report
Avison Young - San Diego 4225 Executive Square, Suite 600La Jolla, CA 92037858.201.7070
www.avisonyoung.com
Vacancy Rates
Net Absorption
Partnership. Performance.
FIRST QUARTER 2016
Market Overview
San Diego Office Market Report
Market Snapshot Asking Rent
* The information reported is based on data pertaining to office properties that are at least 20,000 sf and 2-stories or greater. Rental rates are estimated full service and have been calculated at the monthly rate.
San Diego Office Vacancy Retracts As Rents Continue To Climb
San Diego’s office market is moving forward with confidence, supported by its diverse industries and desirable geography. The region is a thriving hub for biotechnology, telecommunications, defense and tourism, which have contributed to the resilience of the market since the Great Recession. There is strong demand for space from healthcare innovators, independent research institutes and sectors that work closely with the local military. The unemployment rate for San Diego County, as of March 2016, dropped to 4.7%. Year-to-date, unemployment levels are markedly lower in comparison with the previous year.
The San Diego County office vacancy rate has dipped significantly to 10.5% at the first quarter of 2016, from the 11.5% that had been seen in the first quarter of the previous year. Vacancy is now at the lowest rate since pre-recession. Vacancy throughout the previous year had been impacted by the downsizing of Qualcomm in the Central Coast area, however steady demand has helped the area rebound quickly. Rental rates in the overall county are still making consistent headway year-over-year, with escalation moving at a slightly faster speed than the gradual pace of decreasing vacancy. By the end of the first quarter of 2016, the average asking rental rate for all classes reached $2.54 psf full-service gross (FSG), up from $2.48 psf FSG one year earlier. Amongst the submarkets, the highest rents, by far, are found in the Central Coast area, at $3.21 psf FSG. The North County Coastal area achieved the next highest rents, at $2.50 psf FSG. Meanwhile quarter-over-quarter growth was flat to negative for the remailing submarkets, but expected to become positive by the end of the year. Total net absorption for the year to date at the first quarter of 2016 was a positive 503,031 sf.
The San Diego office market had ten investment-grade office projects under construction at the first quarter of 2016. These projects amount to more than 1,582,457 sf of new inventory that will be delivered throughout 2016 and 2017, approximately 70% of which is already pre-committed, with the remainder currently on the market.. All new office construction is currently located in the Central Coast and North County areas. The three largest projects reflect the growing needs of the life science sector in the Central Coast area of San Diego. In total there is nearly one million square feet of space under construction with designated lab buildout to accommodate life science companies. The UTC market saw the completion of The Oberlin, a 62,434 square foot creative space office park, with no tenant pre-commitments. There is currently more than 12 million square feet of proposed office development on record in the county, which is an increase of 50% over the amount of proposed space at the same time in the previous year. A gradual increase in new construction is expected to continue through 2016.
First Quarter 2016 | San Diego Office Report
M A J O R L E A S E T R A N S A C T I O N S
M A J O R S A L E T R A N S A C T I O N S
Of the 12.0m sf of proposed office space being marketed in San Diego, 21% of the volume is located in Downtown, 17% is located in Sorrento Mesa, and 11% is located San Marcos.
The population in San Diego County is experiencing a faster growth rate than that of the state as a whole, expanding 5.4% over the past four years. There are approximately 3,263,431 people living in San Diego County as of 2014.
* The information reported is based on data pertaining to office properties that are at least 20,000 sf and 2-stories or greater. Rental rates are estimated full service and have been calculated at the monthly rate.
U N D E R C O N S T R U C T I O N
In 2015 San Diego ranks 17th among the top U.S. cities for the number of Energy Star rated buildings. Over 46 million sf. in 467 facilities, have achievd Energy Star labels in the county of San Diego.
San Diego is highlighted for it's technology, innovation and forward -thinking, as the one U.S. city profiled in National Geographic's documentary spaning 18 cities in World's Smart Cities.
S a n D i e g o R e g i o n s B y T h e N u m b e r s
First Quarter 2016 | San Diego Office Report
* The information reported is based on data pertaining to office properties that are at least 20,000 sf and 2-stories or greater. Rental rates are estimated full service and have been calculated at the monthly rate.
First Quarter 2016 | San Diego Office Report
* The information reported is based on data pertaining to office properties that are at least 20,000 sf and 2-stories or greater. Rental rates are estimated full service and have been calculated at the monthly rate.
First Quarter 2016 | San Diego Office Report
G e o g r a p h i c C o v e r a g e
East County College AreaMission Gorge
El CajonLa MesaSantee
Lemon Grove
Downtown Business District Downtown San Diego
Central San Diego Old Town/Sports Arena/Point Loma Mission Valley North Park/South ParkBankers Hill/Hillcrest/Mission Hills Pacific Beach/Rose Canyon/Morena Kearny Mesa
South Bay CoronadoImperial Beach Chula Vista National CityOtay MesaSoutheast San Diego
Central Coast Sorrento ValleyDel Mar Heights/Carmel ValleySorrento MesaLa JollaTorrey PinesUTCGovernor Park
North County Inland EscondidoRancho Bernardo PowayMira Mesa/Miramar Scripps Ranch
North County Coastal OceansideCarlsbadVista San Marcos EncinitasSolana Beach Del MarRancho Santa Fe
N County Inland
N County Coastal
East County
South Bay
Central City
Central Coast
Downtown
U n e m p l o y m e n t R a t e s
United States: Improving
March 2016 5.0%
March 2015 5.5%
San Diego County: Improving
March 2016 4.7%
March 2015 5.4%
California: Improving
March 2016 5.4%
March 2015 6.5%
Avison Young at a Glance
Contact Information - Southern California, United States
213.935.7430 323.851.6666
www.avisonyoung.com
310.899.1800
Los Angeles - Downtown 555 S Flower St, Ste 3200Los Angeles, CA 90071 Primary Contact: Ted [email protected]
Los Angeles - North6711 Forest Lawn DrLos Angeles, CA 90068 Primary Contact: Mark Evanoff [email protected]
Los Angeles - West10940 Wilshire Blvd, Ste 2100 Los Angeles, CA 90024 Primary Contact: Jonathan Larsen [email protected]
Los Angeles - Santa Monica 301 Arizona Ave, Ste 303 Santa Monica, CA 90401 Primary Contact: Randy [email protected]
San Diego - La Jolla4225 Executive Sq, Ste 600 La Jolla, CA 92037Primary Contact: Jerry Keeney [email protected]
858.201.7077
Orange County - Irvine 2030 Main Street, Ste 150 Irvine, CA 92614Primary Contact: Stan Yoshihara [email protected] 858.201.7072
Report Prepared By:Amber Jagers - Research Manager 4225 Executive Sq, Ste 600La Jolla, CA 92037
Regional Managing Director: Chris Cooper - Corporate 555 S Flower St, Ste 3200 Los Angeles, CA 90071
© 2015, Avison Young (Canada) Inc. The statistics contained in this report were obtained from sources deemed reliable, including Avison Young, Bureau of Labor Statistics, CoStar Group Inc., Real Capital Analytics, Inc., Reis Services, LLC, State of CA Employment Development Department, U.S. Green Building Council. However, Avison Young (Canada) Inc. does not guarantee the accuracy or completeness of the information presented, nor does it assume any responsibility or liability for any errors or omissions. All opinions expressed and data provided herein are subject to change without notice. This report cannot be reproduced in part or in full in any format without the prior written consent of Avison Young (Canada) Inc.
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