San Diego office market remains healthy as companies expand
In the second quarter, the San Diego office market reported positive net absorption again as area companies continue to expand, according to Transwestern.
Direct average rental rates have increased to a 10-year high as vacancy levels have decreased yet again. Compared to previous cycles when oversupply became an issue, San Diego has seen very little new largescale speculative office development. As a result, expect healthy market fundamentals to continue through the second half of the year despite continued concerns over Qualcomm, which is one of the largest private employers and office occupiers locally.
Total year-over-year nonfarm employment increased by 32,500 (2.2 percent), while year-over-year office-using employment growth has grown by 17,100 (4.5 percent). Compared to a year ago when year-over-year nonfarm and office-using employment grew at 2.1 percent and 0.7 percent, respectively, employment growth in San Diego has accelerated recently due to business optimism stemming from recent tax reform, as well as higher defense spending, which remains a key driver of the San Diego regional economy.
And assuming the overall economy continues to grow, expect more area companies to continue to expand, especially in the region’s technology and coworking sectors.
Approximately $420.5 million in office sales occurred in the second quarter, which was up 88 percent from the $224.0 million in office sales reported in the first quarter. Total office sales volume in the first half of 2018 of $644.5 million was up 13 percent from the $571.2 million reported in the same period in 2017.
