“It’s going to take time but you’re going to see transactions being completed. It may not go as fast as we’ve seen in the last 10 years, but we were also in extra innings of a very strong market. Unfortunately COVID put a halt to our momentum,” Applbaum said. “I think you’re going to see recovery as deals are getting done through the rest of this year but you’ll see it at a stronger level in 2022.”
Colliers in its review of the office market for the first quarter of 2021 reported that the vacancy rate had reached 14% countywide – the highest it’s been since 2003.
Of all the submarkets, downtown has been hit the hardest when it comes to office space, with a vacancy rate that hit 25% in the first quarter, according to Colliers.
Vacancy rates in the first quarter were lowest in East County at 5.4% and South County at 7.2%, according to Colliers.
Also on the plus side, Colliers noted that office rents have held stable.
“Some core submarkets such as Carmel Valley and UTC continue to see rents grow and lead all other submarkets,” Collier’s noted, with class A building rents averaging $4.28 per square foot in Carmel Valley and $3.84 per square foot in UTC according to Colliers.
Colliers also reported the new office construction continued strong in the first quarter with 1.9 million square feet under construction.
In 2021, more than 1 million square feet of office space is expected to come on line, which would make 2021 the most active year for office development since 2015, according to Colliers.
While that might seem risky, Colliers reported that 53% of the new space is leased ahead of completion or owner occupied.
The commercial real estate brokerage Cushman & Wakefield was even more upbeat coming out of the first quarter.
Among the notable deals coming out of the first quarter, according to Cushman & Wakefield, Apple signed the largest office lease of the period, taking a 135,000 square-foot building in Rancho Bernardo.
Apple also leased 63,000 square feet of space in Eastgate with plans for further growth, Cushman & Wakefield noted.
“Active tenant requirements of all sizes remain robust at 4.4 million square feet over the next 24 months countywide, led by Apple’s search for a San Diego campus,” Cushman & Wakefield reported. “While many of these tenants paused their plans due to COVID-19, a majority have activated their requirement of begun exploring the market.”
Cushman & Wakefield also reported that tenants absorbed 196,000 square feet of office space in the first quarter “after four negative quarters of absorption.”