San Diego County’s industrial market ended the second quarter relatively strong, tenant demand for office space slowed, while the retail market was still “on fire.”
That’s the latest from CB Richard Ellis’ second-quarter 2006 report.
Some tidbits:
– Net absorption for San Diego’s industrial market totaled more than 741,000 square feet, while the vacancy rate fell to 5.4 percent.
– Overall, tenant demand has slowed, but the market still is experiencing decent activity from smaller tenants needing less than 10,000 square feet.
– The Westfield Plaza Bonita shopping center in National City broke ground on a $100 million redevelopment and expansion project July 18. The for-sale condo market also has been solid, as users are looking for alternatives to increased rental rates and low vacancies across the county. Hot areas are Otay Mesa and Carlsbad, where projects are being built to accommodate the demand.
– The product types with the most activity during the quarter were light industrial and corporate headquarters space.
– New construction remained active with more than 4.5 million square feet of new product in the works, most of it in such outlying markets as Otay Mesa, Oceanside, Carlsbad, Temecula and Murrieta.
Demand for San Diego’s office market slowed during the second quarter as the county experienced negative net absorption for the first time in more than three years. This pushed vacancy up to 9.4 percent, a rise of 0.3 percent.
– The most notable trend during the past six months is the increase in average asking rental rates, particularly in the higher-end Class A sub-markets, such as Del Mar Heights, UTC (University Towne Center), Mission Valley and downtown San Diego. Landlords are asking upward of $3.50 to $3.75 per square foot, plus electric, compared with $3 to $3.25 at the end of last year.
– Overall, the average asking lease rate increased to $2.30, a minor increase over the prior quarter, but an 11 percent jump compared with the same time last year, when the rate was $2.07.
San Diego’s retail market continued to heat up, with an overall vacancy rate of less than 3 percent. But tenant demand is still strong, especially from big-box tenants and quick-serve restaurants, such as Panda Express, Quiznos and Starbucks.
– Construction activity is booming, with more than 3.8 million square feet under construction, most of it in such outlying markets as east Chula Vista, Temecula and Murrieta.
– Lease rates are continuing to increase, due to the lack of quality options for retailers.
The market is expected to loosen a bit, heading into the next 12 to 18 months, as new construction comes on-line, giving tenants a few more spaces to choose from.
, Pat Broderick
