Q2 2012 San Diego, California Office Submarket Trends

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Q2 2012 San Diego, California Office Submarket Trends

San Diego is not a CBD-oriented office market. Downtown is the largest submarket by a small amount, and only accounts for one-sixth of the total supply. La Jolla, rather than Downtown, commands the highest average rent.

Downtown

  • The 10-million-square-foot Downtown submarket has a second quarter 2012 vacancy rate of 17.0% and an average asking rent of $29.31 psf, according to Reis.
  • The vacancy rate increased 90 basis points during the quarter on 91,000 square feet of negative net absorption, and is up 60 basis points year-over-year. Both the average asking rent and the average effective rent decreased 0.1% over the quarter, the latter to $23.37 psf. The year-over-year gains are 0.1% and 0.2%, respectively.
  • Voit Commercial reports a 17.27% vacancy rate and a $25.92 average asking lease rate for 13 million square feet in its Downtown submarket.
  • Reporting on Downtown (Central Business District), Colliers notes that the submarket posted negative net absorption of 41,818 square feet in the second quarter. “Overall demand in the CBD still continues to be weak and some tenants have relocated, and will continue to relocate, to the suburban submarkets of Central County primarily. This trend will most likely equate to continued vacancies throughout the last half of the year,” this source notes.

North Coastal

  • For its 8.3-million-square-foot La Jolla area submarket, Reis reports a vacancy rate of 15.0%, and an average asking rent of $34.63 psf, the highest among the 11 submarkets.
  • The vacancy rate fell 120 basis points on 99,000 square feet of positive net absorption. The average asking rent and the average effective rent both rose 0.1% over the quarter, the latter to $28.76 psf. Rents are up 1.9% and 2.1%, asking and effective, over 12 months.
  • For La Jolla, Cushman & Wakefield reports a direct vacancy rate of 11.4% and an overall weighted average rental rate of $33.24 psf.
  • For its La Jolla submarket, Voit Commercial reports a vacancy rate of 9.95%, amidst 4,415 square feet of negative net absorption. The average asking lease rate is reported at $32.40 psf.
  • “Tenants absorbed 14,551 square feet in North County and 121,569 square feet in South County during the second quarter which was a welcome change from the first quarter when tenants returned space across all classes in North and South Counties,” according to Cassidy Turley. North County has a direct vacancy rate of 22.8% and a average Class A asking rent of $29.04 psf, according to this source.
  • Voit Commercial reports a vacancy rate of 18.7% for 4.4 million square feet in Del Mar Heights/Carmel Valley, with an average asking lease rate of $38.16 psf, and a 13.8% vacancy rate and $32.88 psf average asking lease rate for 7.6 million square feet in University Towne Center.
  • In the 9.9-million-square-foot N. Co. Coastal submarket, the second quarter vacancy rate is 20.3%, and the average asking rents is $31.18 psf, according to Reis. The vacancy rate fell 10 basis points on 10,000 square feet of positive net absorption, and is down 60 basis points year-over-year.
  • The average asking rent and the average effective rent both rose 0.1% in the quarter, the latter to $25.47 psf. The year-over-year gains are 0.4% and 0.6%, respectively.
  • For Carlsbad, Colliers reports a total vacancy rate of 23.4% and an average asking rental rate of $24.36 psf.
  • For 6 million square feet in Carlsbad, according to Voit Commercial, the vacancy rate is 23.22% and the average asking lease rate is $26.16 psf. For 2.4 million square feet in the North Beach Cities submarket, Voit reports vacancy at 9.13% and the average asking lease rate at $32.04 psf.

Sorrento Valley

  • The 6.5-million-square-foot Sorrento Valley submarket has a vacancy rate of 15.0%, and an average asking rent of $29.55 psf, Reis reports.
  • Net absorption was negative at 20,000 square feet, Reis reports. Vacancy is up 30 basis points for the quarter but down 230 year-over-year. The average asking and effective rents both increased 0.6% over the quarter, the latter to $24.26 psf. Asking and effective rents are up 0.7% and 0.9% over the year.
  • For its Sorrento Mesa submarket, Voit Commercial reports a vacancy rate of 12.54% and an average asking lease rate of $32.04 psf.
  • Colliers reports the construction of a 248,882-square-foot build to suit in Sorrento Mesa for the FBI which will be completed in 2013.
  • For it Sorrento Mesa submarket, Cushman & Wakefield reports direct vacancy at 5.5%, and a direct weighed Class A average rent of $35.52 psf.

Interstate-15 Corridor

  • The 7.4-million-square-foot Reis Interstate-15 Corridor submarket (including Rancho Bernardo, Poway, Sabre Springs and Scripps Ranch) has a vacancy rate of 18.2%, and an average asking rent of $26.64 psf, according to Reis.
  • The vacancy rate decreased 110 basis points in the second quarter, as the average asking rent rose 0.4% and the average effective rent increased 0.5% to $20.09 psf. The year-over-year rent gains are 0.8% and 1.1%, respectively.
  • Voit Commercial reports a 16.29% vacancy rate, and a $23.52 psf average asking lease rate for 12.4 million square feet in the I-15 Corridor submarket.
  • “The submarkets of Rancho Bernardo, Sorrento Mesa and Kearny Mesa, all of which have class A vacancy rates below 8%, accounted for the majority of class B net absorption with a combined total of 134,191 square feet in the second quarter,” Cushman & Wakefield report.
  • According to Colliers, total second quarter vacancy in the I-15 Corridor is 15.8%. The average rental rate is $25.44 psf.

Central San Diego

  • The 2.4-million-square-foot Central San Diego submarket has a vacancy rate of 6.7%, lowest among the submarkets, and an average asking rent of $24.67 psf.
  • The vacancy rate fell 60 basis points during the quarter and is down 40 basis points over the year. The average asking rent and the average effective rent both fell 0.2%, the latter to $19.65 psf. Rents are up 1.2% asking and 1.7% effective from a year earlier.
  • For its Uptown/Hillcrest submarket, Voit Commercial reports vacancy at 8.16% and an average asking lease rate of $25.56 psf.

Mission Valley

  • The 5.6-million-square-foot Mission Valley submarket has a vacancy rate of 17.6%, and an average asking rent of $25.30 psf, according to Reis.
  • The vacancy rate fell 50 basis points during second quarter, and asking rents increased 0.2% with the effective average unchanged at $20.61 psf. The asking and effective averages are up 1.4% and 1.5%, respectively, year-over-year.
  • For 7 million square feet in Mission Valley, Voit Commercial reports a vacancy rate of 13.23%, and an average asking lease rate of $23.16 psf.
  • For Mission Valley, Colliers reports a total vacancy rate of 12.6% and an average rental rate of $24.72 psf. For Mission Valley, Cushman & Wakefield reports a direct vacancy rate of 11.4%.