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2008 San Diego County office demand was at its weakest level in over a decade. Excluding 2001 when San Diego felt the effects of a relatively mild recession triggered chiefly by the events of 9/11, net absorption never fell to negative levels. Most of 2008’s negative demand was driven by tenant move-outs that occurred in Q4. For the first nine months of the year, demand was positive – albeit, at nearly flat levels.
Absorption was positive through the first three quarter of 2008 but suffered a 712,727-square-foot loss in the fourth quarter alone: the worst quarter for office on record. This brought year-to-date net absorption to -697,416 square feet, eroding the minor positive activity that occurred in the first nine months of 2008. While sublease vacancy trended slightly downward for the year, the vacancy of direct space increased significantly. Even though new supply (defined as construction completed in 2008) significantly contributed to the direct vacancy increase, pre-existing buildings gave back 1.8 million square feet to the market.
The countywide total vacancy of 17.1% is comprised of 15.2% direct vacancy and 1.9% sublease vacancy. Over the past year, direct vacancy has increased by 3.7% (11.5% in Q4 2007) while sublease vacancy has decreased by 0.5% (2.5% in Q4 2007).
Contact Chris Reutz at 858.677.5385 for more information.
  San Diego Knowledge Report - Office - 2008Q4.pdf
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