San Diego’s market is currently doing fairly well. Last month, we published an article about how the city was finally shifting to a buyer’s market. While San Diego has been a historically difficult market to penetrate, private reports have found that there’s been an 11% dip in purchase prices.
The Q1 2019 Market Report in San Diego shows more promise for investors in the rental industry. Rental rates have increased slightly from $2.67per square foot to $2.69 per square foot.
During the first quarter of 2019, the office market was strong. According to the report, “A diverse employment base, combined with a well-educated population and a paucity of ground-up spec development, has set the San Diego office market on firm footing.”
The average vacancy rate lowered slightly, from 9.51% to 9.61%. Construction in San Diego has also lowered significantly. During Q1 2018, nearly 350,000 square-feet of office space was under construction, and nearly 220,000 square feet in deliverables. With limited spec construction and low vacancies, it’s ultimately helped San Diego’s rent growth for investors. Furthermore, occupation hovers near post-reception highs.
And lastly, according to the Institute for Supply Management, national industrial indicators include 119 consecutive months of overall economy growth, and 30 months of manufacturing employment growth.
At the end of Q1, vacancy in the county hovered around 5.1%, a 17-point basis increase from last quarter. Direct vacancy comprised 4.7% of inventory, and sublease vacancy was 0.4%. According to the research and forecast report from Colliers International, Campus Point/Eastgate (10.4%) and Carlsbad (10.1%) were the only submarkets with double-digit vacancy rates. The increase in Carlsbad’s vacancy was driven by new construction completed in Q1, while Campus Point/Eastgate’s vacancy was concentrated exclusively in life science and wet lab space.
Of the major market areas countywide, only North County had vacancy over 6%. This market will see its vacancy drop as new construction in Carlsbad and Oceanside continues to absorb over the next nine months of the year. East County was the tightest submarket with an overall vacancy of 1.7%.