FIRST QUARTER 2016 San Diego Office Market Report Partnership. Performance. Avison Young - San Diego 4225 Executive Square, Suite 600 La Jolla, CA 92037 858.201.7070 www.avisonyoung.com
FIRST QUARTER 2016 San Diego Office Market Report Partnership. Performance. Market Snapshot Asking Rent Market Overview San Diego Office Vacancy Retracts As Rents Continue To Climb San Diego s office market is moving forward with confidence, supported by its diverse industries and desirable geography. The region is a thriving hub for biotechnology, telecommunications, defense and tourism, which have contributed to the resilience of the market since the Great Recession. There is strong demand for space from healthcare innovators, independent research institutes and sectors that work closely with the local military. The unemployment rate for San Diego County, as of March 2016, dropped to 4.7%. Year-to-date, unemployment levels are markedly lower in comparison with the previous year. Vacancy Rates Net Absorption The San Diego County office vacancy rate has dipped significantly to 10.5% at the first quarter of 2016, from the 11.5% that had been seen in the first quarter of the previous year. Vacancy is now at the lowest rate since pre-recession. Vacancy throughout the previous year had been impacted by the downsizing of Qualcomm in the Central Coast area, however steady demand has helped the area rebound quickly. Rental rates in the overall county are still making consistent headway yearover-year, with escalation moving at a slightly faster speed than the gradual pace of decreasing vacancy. By the end of the first quarter of 2016, the average asking rental rate for all classes reached $2.54 psf full-service gross (FSG), up from $2.48 psf FSG one year earlier. Amongst the submarkets, the highest rents, by far, are found in the Central Coast area, at $3.21 psf FSG. The North County Coastal area achieved the next highest rents, at $2.50 psf FSG. Meanwhile quarter-over-quarter growth was flat to negative for the remailing submarkets, but expected to become positive by the end of the year. Total net absorption for the year to date at the first quarter of 2016 was a positive 503,031 sf. The San Diego office market had ten investment-grade office projects under construction at the first quarter of 2016. These projects amount to more than 1,582,457 sf of new inventory that will be delivered throughout 2016 and 2017, approximately 70% of which is already pre-committed, with the remainder currently on the market.. All new office construction is currently located in the Central Coast and North County areas. The three largest projects reflect the growing needs of the life science sector in the Central Coast area of San Diego. In total there is nearly one million square feet of space under construction with designated lab buildout to accommodate life science companies. The UTC market saw the completion of The Oberlin, a 62,434 square foot creative space office park, with no tenant precommitments. There is currently more than 12 million square feet of proposed office development on record in the county, which is an increase of 50% over the amount of proposed space at the same time in the previous year. A gradual increase in new construction is expected to continue through 2016.
MAJOR LEASE TRANSACTIONS MAJOR SALE TRANSACTIONS U NDER CONSTRUCTION The population in San Diego County is experiencing a faster growth rate than that of the state as a whole, expanding 5.4% over the past four years. There are approximately 3,263,431 people living in San Diego County as of 2014. Of the 12.0m sf of proposed office space being marketed in San Diego, 21% of the volume is located in Downtown, 17% is located in Sorrento Mesa, and 11% is located San Marcos. In 2015 San Diego ranks 17th among the top U.S. cities for the number of Energy Star rated buildings. Over 46 million sf. in 467 facilities, have achievd Energy Star labels in the county of San Diego. San Diego is highlighted for it's technology, innovation and forward -thinking, as the one U.S. city profiled in National Geographic's documentary spaning 18 cities in World's Smart Cities.
San Diego Regions By The Numbers
Geographic Coverage N County Coastal Central Coast Central City Downtown N County Inland South Bay East County North County Coastal Oceanside Carlsbad Vista San Marcos Encinitas Solana Beach Del Mar Rancho Santa Fe North County Inland Escondido Rancho Bernardo Poway Mira Mesa/Miramar Scripps Ranch East County College Area Mission Gorge Lemon Grove El Cajon La Mesa Santee Central Coast Sorrento Valley Del Mar Heights/Carmel Valley Sorrento Mesa La Jolla Torrey Pines UTC Governor Park Central San Diego Old Town/Sports Arena/Point Loma Mission Valley North Park/South Park Bankers Hill/Hillcrest/Mission Hills Pacific Beach/Rose Canyon/Morena Kearny Mesa Downtown Business District Downtown San Diego South Bay Coronado Imperial Beach Chula Vista National City Otay Mesa Southeast San Diego Unemployment Rates San Diego County: Improving March 2016 4.7% March 2015 5.4% California: Improving March 2016 5.4% March 2015 6.5% United States: Improving March 2016 5.0% March 2015 5.5%
Avison Young at a Glance Avison Young, a real estate company committed to you. A Growing, Multinational Presence We deliver results that are aligned with your strategic business objectives, support real estate initiatives that add value, and build competitive advantage for your organization. Avison Young is the real estate partner businesses trust for intelligent, integrated solutions. Avison Young is Canada s largest independently owned commercial real estate services company. Founded in 1978 as Graeme Young & Associates of Edmonton; Merged with and Avison & Associates in 1996 to form Avison Young. In 2009, Avison Young began international expansion and has since opened 45 U.S. and 5 European offices. In 2011-2014, Avison Young won designation as one of Canada s Best Managed Companies, Canada s most prestigious corporate award. In 2015, Avison Young was named a Canada s Best Managed Companies Gold Standard winner (2014). Avison Young is the world s fastest-growing commercial real estate services firm. Headquartered in Toronto, Ontario, Avison Young is a collaborative, global firm owned and operated by its principals. Founded in 1978, the company comprises 1,700 real estate professionals in 66 offices, providing valueadded, clientcentric investment sales, leasing, advisory, management, financing and mortgage placement services to owners and occupiers of office, retail, industrial and multi-family properties. Contact Information - Southern California, United States Los Angeles - Downtown Los Angeles - West Los Angeles - North 555 S Flower St, Ste 3200 10940 Wilshire Blvd, Ste 2100 6711 Forest Lawn Dr Los Angeles, CA 90071 Los Angeles, CA 90024 Los Angeles, CA 90068 Primary Contact: Ted Simpson Primary Contact: Jonathan Larsen Primary Contact: Mark Evanoff ted.simpson@avisonyoung.com jonathan.larsen@avisonyoung.com mark.evanoff@avisonyoung.com 213.935.7430 213.471.1069 323.851.6666 Los Angeles - Santa Monica 301 Arizona Ave, Ste 303 Santa Monica, CA 90401 Primary Contact: Randy Starr randy.starr@avisonyoung.com 310.899.1800 Orange County - Irvine San Diego - La Jolla Regional Managing Director: Report Prepared By: 2030 Main Street, Ste 150 4225 Executive Sq, Ste 600 Chris Cooper - Corporate Amber Jagers - Research Manager Irvine, CA 92614 La Jolla, CA 92037 555 S Flower St, Ste 3200 4225 Executive Sq, Ste 600 Primary Contact: Stan Yoshihara Primary Contact: Jerry Keeney Los Angeles, CA 90071 La Jolla, CA 92037 stan.yoshihara@avisonyoung.com jerry.keeney@avisonyoung.com chris.cooper@avisonyoung.com amber.jagers@avisonyoung.com 949.757.1190 858.201.7077 213.935.7435 858.201.7072 www.avisonyoung.com 2015, Avison Young (Canada) Inc. The statistics contained in this report were obtained from sources deemed reliable, including Avison Young, Bureau of Labor Statistics, CoStar Group Inc., Real Capital Analytics, Inc., Reis Services, LLC, State of CA Employment Development Department, U.S. Green Building Council. However, Avison Young (Canada) Inc. does not guarantee the accuracy or completeness of the information presented, nor does it assume any responsibility or liability for any errors or omissions. All opinions expressed and data provided herein are subject to change without notice. This report cannot be reproduced in part or in full in any format without the prior written consent of Avison Young (Canada) Inc.