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Steady Vacancy Figures Reveal Strong Market

Third-quarter reports keep coming.

Newmark Pacific reports that the San Diego office market continued its strong performance in the third quarter, with office rates idling in the 12 percent range, remaining essentially flat from a year ago.

“The steady vacancy rate reflects a market where both substantial amounts of space have been absorbed, while at the same time, plenty of new office space has come to market,” said Peter P. Kozel, the executive managing director of research and real estate strategies for Newmark.

“For example, by the last quarter of 2004, about 3.5 million square feet of office space was under construction, and close to 2 million square feet has been added to the stock of space during the past year.

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“Over the same time, about 1.6 million square feet was absorbed. With 1.7 million square feet still in the pipeline, maintaining the current pace of space absorption means that the vacancy rate remains at least constant over the next one to two years.”

Some other tidbits:

– Rents also have done well in the last year, increasing by about 9 percent.

“One should expect additional gains over the next few years,” said Kozel. “Vacancy will remain steady or decline and the pace of new development has moderated.”

With steady gains in employment and a moderation in the pace of development, the office sector will continue to perform well over the next several years,” said Kozel.

Meanwhile, CB Richard Ellis reported that the industrial market has slowed a bit, posting flat numbers across the board during the third quarter.

More tidbits:

– Although net absorption levels were solid, they were largely dependent on construction deliveries during the quarter. Because of this, the countywide vacancy rate crept up about 2 percent to 5.7 percent.

– The total square feet of new projects under construction remained above 3.3 million for the sixth straight quarter. According to Burnham Real Estate’s third-quarter market report, San Diego’s industrial space “keeps getting stronger.”

“The local industrial market is on track for its best year since 2000, when 4.6 million square feet of space was absorbed,” said Charles Adolphe, a vice president and industrial specialist with Burnham Real Estate.

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Affordability Index:

The North County Housing Affordability Index for September has been released by the North San Diego County Association of Realtors.

– The September median price for all homes in North County , both single-family detached and single-family attached , decreased to $565,000 from $570,000 in August. Elsewhere in the county, the figure was $499,000, down from $500,000 in August 2005.

– The median-priced single-family detached home in North County was $620,000, a 2.8 percent decline from the year-to-date high of $637,750 reported in August. For other ZIP codes in the county, SFD homes reported a small decrease from the $555,000 median price in August to $552,500 in September.

– SFD median home prices were highest in Rancho Santa Fe, at $2.4 million, with median SFD prices above $1 million in Del Mar, Solana Beach, Carmel Valley, Cardiff-by-the-Sea and Rancho Bernardo. At the lower half of the spectrum, SFD median prices ranged from $425,000, Pauma Valley, to $593,500, San Marcos.

– The median-priced single-family attached home in North County was $383,500 in September, a 4 percent decrease from $385,000 in August, compared with other San Diego ZIP codes, where prices declined 1.3 percent from $389,950 in August to $385,000 in September.

– Median SFA prices were the highest in Rancho Santa Fe at $783,500, followed by Solana Beach, with $769,995, and then Del Mar, Carmel Valley, Cardiff-by-the-Sea, Encinitas, San Marcos and Carlsbad, with prices exceeding $500,000.

– The lowest median prices in North County were reported in Escondido, Vista, San Marcos, Oceanside, Bonsall, Rancho Bernardo and Rancho Penasquitos, with prices ranging from $256,000 to $350,000.

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Big Deals:

Shamrock Capital Advisors, an affiliate of Burbank-based Shamrock Holdings of California, Inc., the investment arm of the Roy E. Disney family, has completed the closing of the $104 million Genesis Real Estate Fund II.

With the fund, Shamrock will extend its reach beyond Los Angeles County to include San Diego, as well as Kern, Riverside, San Bernardino, Ventura, Santa Barbara, Orange and Imperial counties.

The fund will provide gap financing to developers on projects ranging from $10 million to $80 million, and provide help in deal origination, financial structuring, feasibility studies, and project streamlining, among other services.

The joint venture of San Diego-based Crown Pacific Properties, LLC and AEW Partners IV, L.P. has sold two apartment properties in Phoenix , the 255-unit Landmark Tower for $29.2 million, and the 440-unit Portofino Apartments for $50.6 million.

A partnership of three Southern California-based real estate firms has bought 24.9 acres of land from the city of Oceanside to develop Seagate Corporate Center, a 380,000-square-foot business park designed for corporate headquarters, office, research and development, and light industrial use.

The parcel, about five miles east of Interstate 5 and a mile south of state Route 76, was purchased for $6.6 million by the Koll Co.


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

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