San Diego Bounces Back in Q2 with Strong Numbers in Industrial and Office Markets, According to Voit
Judith Brower/Jenn Quader
Brower, Miller & Cole
SAN DIEGO BOUNCES BACK IN Q2 WITH STRONG NUMBERS
IN INDUSTRIAL AND OFFICE MARKETS, ACCORDING TO VOIT
• Office vacancy drops to its lowest rate since mid-2008.
• Industrial market posts positive net absorption for the ninth consecutive quarter
• Transaction activity picks up in both industrial and office market
San Diego, Calif., (July 9, 2012) –San Diego’s industrial and office markets demonstrated strong signs of recovery during the second quarter of 2012, according to a Second Quarter Market Report from Voit Real Estate Services. Office vacancy dipped to 14.24 percent, the lowest rate seen since mid-2008, while the industrial market posted its ninth consecutive quarter of positive net absorption, posting 165,816 square feet.
“There was substantial improvement in the market from Q1 to Q2, and these numbers are positive indicators that the San Diego market is moving again,” said Chris Wood, Managing Director of Voit’s San Diego office. “We have seen a pickup in transaction volume across all product types, and we expect that we will see a further increase in investment and leasing activity throughout the remainder of 2012.”
Wood notes that this increased activity will help to drive up both industrial and office lease rates, which will increase by the fourth quarter of 2012.
Increased Industrial Demand Drives Competition in San Diego
The San Diego industrial market continues to steadily recover, according to Wood. Voit’s Q2 market report indicates that vacancy in direct/sublease industrial space finished the quarter at 7.84 percent, the lowest level reported since mid-2009. Availability also decreased in 2012’s second quarter, with all space being marketed (including direct, sublet, and occupied) dropping to 11.09 percent - a decrease from the previous quarter’s rate of 11.35 percent and the lowest availability rate in the past three years.
“Industrial product is becoming scarcer in San Diego, and both buyers and tenants will begin to see increased competition for industrial space over the next 12 to 24 months,” commented Wood. “As demand picks up, we will see lease rates begin to climb and lease terms lengthen.”
3.9 million square feet of industrial space was leased or sold in the second quarter of 2012, an increase of more than 80 percent compared to the previous quarter. Of particular interest, Wood noted “With low availability rates in Central San Diego, industrial rents will climb fastest in this area. The perimeter submarkets such as Oceanside and Otay Mesa will lag in their recovery. Land scarcity and pricing are the primary reasons we are not seeing significant new light industrial construction begin to fill the pipeline in San Diego as the Inland Empire markets are already experiencing.”
Transaction Activity Doubles in San Diego Office Market
The San Diego office market posted 463,997 square feet of positive net absorption in Q2 of 2012, bringing the market to a total of 2.8 million square feet of positive absorption over the past nine quarters.
In addition, sale and lease transactions totaled 3.3 million square feet in the quarter, nearly doubling the 1.8 million square feet seen in the first quarter of 2012. Much of the office sales volume this quarter can be attributed to the sale of the 642,000-square-foot San Diego Tech Center, according to Voit’s market report.
“San Diego has a diverse economy, which contributes to a great deal of opportunity in the local office market,” noted Wood. “With a variety of industries to absorb space, we will see increased activity in the coming months from professional and business services, leisure and hospitality, and defense companies, as well as from medical and alternative energy companies.”
Availability of office product in San Diego also dropped in Q2, as direct/sublease space being marketed ended the quarter at 17.32 percent, a decrease of 1.5 percent when compared to the availability rate of 2012’s first quarter.
“As office occupancy continues to increase, we will see lease rates tighten up,” explained Wood.
About Voit Real Estate Services
Voit Real Estate Services is now a 10 office commercial real estate firm that, through its brokerage and asset services professionals working together, provides strategic property solutions tailored to clients’ needs. Combining 40 years of expertise in brokerage, investment advisory, financial analysis, market research, asset management, tenant advisory and property management services, Voit provides clients with forward looking strategies that create value for their assets and portfolios.
Voit is a privately held, debt-free firm that has successfully navigated numerous market cycles since 1971 and currently employs more than 250 people. Voit has owned, developed and managed over 50 million square feet of commercial real estate, participated in $1.4 billion of construction projects and completed over $36 billion in brokerage transaction volume. Further information is available at www.voitco.com.