Demand for San Diego office properties has been stimulated by an improving economy and downtown redevelopment, according to a recently released forecast by Marcus & Millichap Real Estate Investment Brokerage Co.
“Office construction is up 40 percent from last year, but strong tenant demand will keep the market in good shape,” said Kent Williams, regional manager of Marcus & Millichap’s San Diego office. “Although sales prices have increased by at least 20 percent in three of the last four years, investors remain attracted to the market’s demographics and future growth potential.”
Some tidbits:
– Total employment is forecast to increase 0.7 percent in 2006 with the addition of 8,500 jobs, compared with the 20,000 positions added last year.
– Office vacancy is expected to decline from 10.9 percent in 2005 to 10.1 percent in 2006, while absorption will total 1.7 million square feet, down slightly from 1.9 million square feet in 2005.
– Strong demand will boost asking rents to $28.74 per square foot in 2006 , a 6.8 percent rise, while effective rents , the amount that landlords actually will collect , are expected to increase 8.1 percent to $25.35 per square foot, as concessions will ease somewhat during the year.
– Office construction in San Diego is forecast to total 1.7 million square feet this year, up 40 percent from 2005, when 1.2 million square feet were added to the metro area.
– In spite of the decline in transactions, the median sale price increased 19 percent to $240 per square foot during the most recent 12-month period.
, Pat Broderick
