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Across the county, nearly one million square feet of negative net absorption pushed overall demand “into the red” for 2008. This is the second consecutive year of negative demand. The 2007 increase in vacancy was driven by negative net absorption as well as the completion of nearly 3 million square feet of new construction. In 2008, new construction was scaled back with just over 770,000 square feet completed during the year.
Q4 combined industrial / R&D net absorption totaled -913,404 square feet. This brought net absorption to -579,836 square feet for all of 2008. The recession has been particularly tough on distribution and warehousing tenants, and even worse on manufacturing tenants. While the amount of vacant sublease space actually decreased in 2008, over 1.1 million square feet of vacant direct space came back on the market due to business closures and – to a lesser degree -- new construction completions.
While relatively flat for the first nine months of the year, vacancy jumped by over 0.6% to stand at 9.1% in Q4. The industrial and R&D vacancy components stood at 8.0% and 11.7%, respectively. Compared to a year ago, R&D vacancy increased by 0.5% (11.2% in Q4 2007) while industrial vacancy increased by 0.8% (7.1% in Q4 2007). The largest decline in demand was for manufacturing space (-635,805 square feet in 2008) with -257,889 square feet occurring in Q4. This was reflected in 1,300 manufacturing sector job losses from August to November.
Contact Chris Reutz at 858.677.5385 for more information.
  San Diego Knowledge Report - Industrial - 2008Q4.pdf
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