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Friday, Apr 19, 2024

Construction of New Office Space Lags Behind Demand

Demand for office and industrial space continues to rise, outpacing construction, and increasing rental rates, according to a new corporate real estate report from Grubb & Ellis/BRE Commercial’s Phillip Linton and Duncan Dodd.

Some tidbits:

– The amount of occupied office space has risen this year by 887,423 square feet and vacancy has dropped to 8.4 percent , the lowest rates since the fall of 2001.

– Building owners are increasing rents to match the increase in demand, with the average monthly asking rent for all office buildings rising to $2.38 per square foot per month, including utilities , $2.74 for Class A properties, and $2.16 for Class B.

– Occupancy of industrial space has increased by more than 1.4 million square feet in 2005, while vacancy has dropped to 7 percent.

– The average monthly asking rent for all industrial property increased to 95 cents per square foot per month, plus all building operating expenses and utilities. Research and development buildings leased at $1.24, and warehouse properties at 68 cents.

– There is more than 2.6 million square feet of office space under construction, with the leading areas being Downtown, Carmel Valley and Rancho Bernardo, and more than 3.4 million square feet of industrial space under construction, with Otay Mesa and Oceanside leading the pack.

Their forecast: “First, the construction of industrial buildings is occurring primarily at the northerly and southerly ends of the county, where land is still available,” according to Linton and Dodd’s report. “Second, a large percentage of the new office buildings are being constructed for particular fast-growing occupants, like Qualcomm in Sorrento Mesa. Third, the dramatic increase in the cost of land and construction materials is forcing owners to hold out for higher rents. Finally, San Diego commercial real estate continues to be a favorite, and buyers are paying record prices for rental properties here.

“Real estate investors view the San Diego economy optimistically, and they continue to pay record prices to build and buy property here. For now, it appears that the laws of supply and demand will keep rental rates up during the second half of the year.”

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Five businesses took the big honors bestowed recently by the Structural Engineers Association of San Diego with its 2005 Excellence in Structural Engineering Awards.

Hope Engineering was cited for best use of conventional technology in new construction for the new Biogen Idec manufacturing facility in Oceanside.

KPFF Engineers won for best use of conventional technology in new construction for the UC San Diego Biomedical Research Building in La Jolla.

SDSE Engineers was recognized for best use of conventional technology in retrofit/alteration for the La Jolla Riford Library Renovation & Jacobs Annex in La Jolla.

Simon Wong/T.Y. Lin International took the award for landmark structures for the Mission Valley East Light Rail Transit Bridge in San Diego.

Simon Wong also won for special-use structures for the El Rancho Road missile transport bridge at Vandenberg Air Force Base.

Certificates of merit went to SDSE Engineers for existing technology in new construction for the La Jolla Riford Library; Ficcadenti Waggoner for existing technology in retrofit/alteration for the Kaiser Design-Build Parking Structure Addition in San Diego; and Simon Wong for landmark structures for the Black Mountain Reservoir in San Diego.

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Big Deal:

The Shidler Group has sold the three-building, 141,000-square-foot Pacific Point Business Park on Pacific Center Boulevard in Sorrento Mesa to Qualcomm Inc. for $30.7 million.

The park is part of a 15-building portfolio of research and development buildings encompassing three business parks the Shidler Group bought for $61.9 million from Mullrock Umbrella LLC in August 2004.

At the time of the purchase, Gamma-Metrics, Tachyon, Inc. and Fujitsu Transaction Solutions were the primary tenants at Pacific Point. Fujitsu recently signed a 63-month lease for 37,886 square feet of office and R & D; space in the Sorrento Tech Business Park. Gamma-Metrics and Tachyon have relocated elsewhere in Sorrento Mesa, and Qualcomm will now occupy 100 percent of Pacific Point Business Park.

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Helping Hands: John Laing Homes has adopted the Ronald McDonald House as its charity for 2005, and will be giving away a $727,000 home on Rosemary Lane at 4S Ranch, a collection of tony homes west of Rancho Bernardo.

The company is selling 18,000 tickets through Sept. 30 at $200 a pop. California residents 18 and older may enter, and the winner can opt for $620,000 in cash instead of the house.

Proceeds from the program will provide funds to help Ronald McDonald House Charities with future expansion to help more families with seriously ill children. Entry forms are available at all San Diego County McDonald’s and online at www.sdmcdonalds.com. The raffle is scheduled for Oct. 22.

Meanwhile, Nyda Jones-Church, the chief operating officer of Prudential California Realty, is donating $1 million to launch the capital campaign to build a YMCA in the Torrey Hills/Carmel Valley area near Del Mar.

Send residential and commercial real estate news to pbroderick@sdbj.com or via fax at (858) 571-3628.


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