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The slowing local economy has led to relatively flat office demand for the first quarter of 2007. Countywide net absorption totaled only 25,623 square feet. However, demand should increase by the second half of 2007 as a result of nearly 1.1 million square feet of future absorption due to pre-leasing or build-to-suit commitments in projects currently under construction. Countywide vacancy increased to 11.9%, the second quarter that vacancy hit the 10%+ mark. The vacancy rate is now at its highest level since 2002. Downtown market vacancy decreased to 13.4% from 13.5%; the Suburban market vacancy rate increased to 11.7% from 11.1%. Newly completed construction added 213,242 square feet of vacant office space to the market first quarter. Net absorption for pre-existing space totaled a negative 60,047 square feet. Over 35% of new construction completed in 2006-to-date remains vacant and comprises nearly 16% of the total countywide vacant inventory. New construction activity has been and will continue to be very brisk. In first quarter, 298,912 square feet was completed. Currently, 3.7 million square feet of space is under construction, with 2.9 million square feet scheduled for completion throughout 2007. Future market conditions will determine whether planned and proposed projects, totaling about 13.1 million square feet, break ground.
Contact Chris Reutz at 858.677.5385 for more information.
  San Diego Office Knowledge Report 2007Q1.pdf
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