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San Diego County office market continues to weather the storm of uncertainty as energy costs and unemployment increase, housing slows, and financial conditions weaken. While demand – as measured by net absorption – continues to be positive, it is decreasingly so with less than 50,000 square feet absorbed countywide. Q2 was the eighth consecutive quarter of increased vacancy, which now stands at 14.9%. New supply continues to drive rising vacancy.
For the most part, Q2 demand was relatively flat on a countywide basis. Net absorption totaled 46,004 square feet. Of that, just over half was attributed to occupancy of new space built during the quarter. Net absorption of 198,567 square feet during the first half of 2008 slightly exceeded the entire demand in 2007. Whereas a major exodus from Class B space occurred in 2007, approaching nearly one million square feet of negative absorption, this trend has reversed with positive demand of 81,239 square feet year-to-date.
Since Q2 2006, countywide vacancy has slowly increased from a low of 8.9% to 14.9% at the close of Q2 2008. Vacancy currently stands at the highest level in over a decade, more than double the 7.4% rate recorded in 1998. However, the rate of increase is slowing – in Q2, vacancy increased only 0.1% compared to a Q1 vacancy increase of 14.8%.
Contact Chris Reutz at 858.677.5385 for more information.
  San Diego Knowledge Report - Office - 2008Q2.pdf
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