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San Diego County office market vacancy continued to trend upward the first three months of 2008. Q1 was the seventh consecutive quarter of increasing vacancy, which now stands at 14.8%. Net absorption nearly reached 250,000 square feet, but still could not keep pace with new supply. Even though new construction completed in the first quarter totaled close to one million square feet, it appears that new supply is slowly being absorbed.
Demand picked up in Q1 with net absorption totaling 228,642 square feet -- the strongest quarter since Q2 2007. In newly completed buildings, absorption measured 333,497 square feet. In contrast, net absorption in pre-existing space was a negative 104,855 square feet.
For the remainder of 2008, vacancy should continue to increase due to continued, new supply coupled with weak demand. It is likely that overall vacancy will top out at nearly 16% by year-end before decreasing in 2009. Class A vacancy could reach 18% considering the pipe-line of new supply that will be added in 2008.
Contact Chris Reutz at 858.677.5385 for more information.
  San Diego Knowledge Report - Office - 2008Q1.pdf
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