San Diego County CA— According to CBRE’s research, the San Diego office market continued to see positive fundamentals, with average asking rates increasing from last quarter to a historically high asking rate.
“With limited new development, tenants are willing to pay a premium for well-appointed and highly amenitized projects in premier locations,” said Matt Carlson, senior vice president of CBRE.
The overall monthly asking rate increased 2.6 percent quarter-over-quarter, which was the largest quarterly jump since Q4 2015. The rate is 4.6 percent higher year-over-year and the highest
asking rate on record for San Diego County.
Vacancy remained flat this quarter at 11 percent, but there was enough activity to keep net absorption positive. Numerous renewals and expansions continued to drive leasing activity, which shows that companies are committing to San Diego. Net absorption was positive 97,729 sq. ft., marking five straight quarters of positive net absorption.
Office sales activity was strong throughout this quarter after many properties remained on the market for sale at the end of Q2 2017. Eleven office sales over $10 million transacted in San Diego in Q3, with four deals landing in Downtown and two in Kearny Mesa. Sales Downtown included DiamondView, Five Thirty B, 600 B Street and 1420 Kettner. DiamondView set a Downtown record for price per sq. ft. at $661. Five Thirty B changed hands for the third time since 2014 as it was sold by Bosa Development to Swift Real Estate Partners. Downtown’s significant population growth, new tenant mix and strong overall CRE fundamentals make it an attractive submarket for investors.
No new office projects broke ground in Q3 2017; however, there was one new office delivery. Torrey Point, a two-building Class A project in Del Mar Heights, was completed this quarter. The smaller 33,733-sq.-ft. building is fully vacant and available while the 57,037-sq.-ft. building is 60 percent leased to Tsunami ARVR. Notable projects that remain under construction are Makers Quarter Block D and 1800 Aston in Carlsbad.
“Not only is Block D the only new construction building in Downtown in over a decade, the cross ventilation, energy efficiency and exciting neighborhood make it an ideal location for collaborative office users,” said Matt Carlson, senior vice president of CBRE.
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About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2016 revenue). The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.