Continued economic and job growth is driving occupancy and rent growth in the San Diego office market. Vacancy fell to 15.1% in Q3 2016, the lowest in nine years. Absorption was positive across the North, Central, and South regions in Q3. Growth is expected to continue into 2017 due to forecasted increases in employment, especially in healthcare. New leasing activity and pre-leasing of under construction space will boost future absorption. Emerging trends include demand for amenity-rich spaces appealing to Millennials and increased co-working activity.
Jll commercial real estate market report toronto 2014Chris Fyvie
office space toronto, toronto office space, office search toronto, office space in toronto, office rentals toronto, commercial office space, commercial real estate toronto, office rent toronto, toronto offices for lease
Manhattan closed sales increased 2% year-over-year in 2Q17, while contracts signed decreased 8%. Median and average sale prices reached record highs of $1.193M and $2.163M respectively, up 8% and 7% from 2Q16. Inventory was nearly flat compared to last year, leading to a 11% rise in months of supply. Studio apartments saw the only decrease in average days on market, down 4% to 79 days on average, while other bedroom types increased over 25% in days on market.
Mercer Capital's Value Focus: Real Estate Industry | Q1 2016 | Segment Focus:...Mercer Capital
Mercer Capital's Real Estate Industry newsletter provides perspective on valuation issues. Each newsletter also typically includes macroeconomic trends, industry trends, and guideline public company metrics.
Commercial Real Estate Market Overview August 2015_tcm78-50654Yirong Song
The document summarizes commercial real estate market trends from 1950-2015. It discusses the post-WWII shift from central business district (CBD) office space to suburban office space due to demographic and economic factors. Starting in the late 1990s and 2000s, CBD office demand increased as crime rates fell and millennials entered the workforce. While CBDs have generally outperformed suburbs, some technology and energy markets saw stronger suburban growth after 2008. Across property types, vacancy rates declined and prices rose from 2014-2015, though retail prices remain below 2007 levels. The industrial, apartment, and office sectors are expected to see declining vacancies and rent growth amid new supply.
Avison commercial office leasing market report toronto 2014Chris Fyvie
office space toronto, toronto office space, office search toronto, office space in toronto, office rentals toronto, commercial office space, commercial real estate toronto, office rent toronto, toronto offices for lease
The document summarizes commercial real estate market conditions in Greater Boston during the third quarter of 2010. Key points include:
- The economy officially ended its recession in mid-2009 but employment levels did not bottom out until late 2009, leading to a sluggish recovery. Unemployment rates remained high across the US and in Massachusetts.
- In Greater Boston, net absorption improved from negative levels a year ago but availability rates remained elevated, suggesting the market is still recovering. Rents declined from a year ago but appeared stable in recent quarters.
- The Boston, Cambridge, and suburban office markets all showed signs of stabilization compared to a year ago, with declining availability and positive but modest absorption. Rents declined
Washington, DC Office Sector Report (Q3 2016)Savills Studley
Office fundamentals in the region have remained soft throughout 2016 resulting in a leasing landscape that is extremely favorable to tenants. The on-going tendency for tenants to rightsize and consolidate, rather than expand, has contributed to the elevated availability. Tenants remain firmly in the driver’s seat as they have no shortage of space options from which to choose and concession values remain at record-high levels.
The West Michigan office market saw solid activity in 2016, with average rental rates up and vacancy rates down from the previous year. New construction projects were completed, including the 120,000 SF Arena Place in downtown Grand Rapids. Several large office buildings in downtown and the suburbs changed hands. Medical office leasing became more active after slowing in 2015. The market is expected to continue seeing demand for downtown office space and new construction in 2017, though limited parking availability may constrain leasing. Rental rates and vacancies are expected to remain favorable for landlords.
Jll commercial real estate market report toronto 2014Chris Fyvie
office space toronto, toronto office space, office search toronto, office space in toronto, office rentals toronto, commercial office space, commercial real estate toronto, office rent toronto, toronto offices for lease
Manhattan closed sales increased 2% year-over-year in 2Q17, while contracts signed decreased 8%. Median and average sale prices reached record highs of $1.193M and $2.163M respectively, up 8% and 7% from 2Q16. Inventory was nearly flat compared to last year, leading to a 11% rise in months of supply. Studio apartments saw the only decrease in average days on market, down 4% to 79 days on average, while other bedroom types increased over 25% in days on market.
Mercer Capital's Value Focus: Real Estate Industry | Q1 2016 | Segment Focus:...Mercer Capital
Mercer Capital's Real Estate Industry newsletter provides perspective on valuation issues. Each newsletter also typically includes macroeconomic trends, industry trends, and guideline public company metrics.
Commercial Real Estate Market Overview August 2015_tcm78-50654Yirong Song
The document summarizes commercial real estate market trends from 1950-2015. It discusses the post-WWII shift from central business district (CBD) office space to suburban office space due to demographic and economic factors. Starting in the late 1990s and 2000s, CBD office demand increased as crime rates fell and millennials entered the workforce. While CBDs have generally outperformed suburbs, some technology and energy markets saw stronger suburban growth after 2008. Across property types, vacancy rates declined and prices rose from 2014-2015, though retail prices remain below 2007 levels. The industrial, apartment, and office sectors are expected to see declining vacancies and rent growth amid new supply.
Avison commercial office leasing market report toronto 2014Chris Fyvie
office space toronto, toronto office space, office search toronto, office space in toronto, office rentals toronto, commercial office space, commercial real estate toronto, office rent toronto, toronto offices for lease
The document summarizes commercial real estate market conditions in Greater Boston during the third quarter of 2010. Key points include:
- The economy officially ended its recession in mid-2009 but employment levels did not bottom out until late 2009, leading to a sluggish recovery. Unemployment rates remained high across the US and in Massachusetts.
- In Greater Boston, net absorption improved from negative levels a year ago but availability rates remained elevated, suggesting the market is still recovering. Rents declined from a year ago but appeared stable in recent quarters.
- The Boston, Cambridge, and suburban office markets all showed signs of stabilization compared to a year ago, with declining availability and positive but modest absorption. Rents declined
Washington, DC Office Sector Report (Q3 2016)Savills Studley
Office fundamentals in the region have remained soft throughout 2016 resulting in a leasing landscape that is extremely favorable to tenants. The on-going tendency for tenants to rightsize and consolidate, rather than expand, has contributed to the elevated availability. Tenants remain firmly in the driver’s seat as they have no shortage of space options from which to choose and concession values remain at record-high levels.
The West Michigan office market saw solid activity in 2016, with average rental rates up and vacancy rates down from the previous year. New construction projects were completed, including the 120,000 SF Arena Place in downtown Grand Rapids. Several large office buildings in downtown and the suburbs changed hands. Medical office leasing became more active after slowing in 2015. The market is expected to continue seeing demand for downtown office space and new construction in 2017, though limited parking availability may constrain leasing. Rental rates and vacancies are expected to remain favorable for landlords.
The trade, transportation and utilities sector added the most jobs (2,200) in San Diego County in December 2016, contributing to a decrease in the unemployment rate. Overall, 28,900 jobs were added in 2016, a 2% annual increase. San Diego has a diverse economy led by government, professional services, healthcare, retail, and hospitality. Strong employment growth is fueling demand across commercial real estate sectors, including positive net absorption in the office, industrial, and retail markets with declining vacancy rates.
The Savills Studley report summarizes commercial real estate trends in the Los Angeles office market in Q4 2016. Key points include: leasing activity declined slightly from the previous quarter but exceeded 2015 levels; availability rates declined while asking rents remained flat; and office property sales sharply increased from the previous year. The recovery is showing signs of moderating heading into 2017 as leasing activity and hiring slow, though conditions remain tight on the Westside and opportunities exist elsewhere in the market.
The Houston office market continued to contract in Q4 2020 with negative absorption of 836,140 square feet. Vacancy rates increased to 21.7% as the COVID pandemic continued to impact the market. Rental rates remained steady while landlord concessions became more aggressive. The outlook remains uncertain depending on vaccine distribution and return to office trends.
Austin's office market saw positive net absorption of 163,796 SF in Q4 2018, bringing the year-to-date net absorption to 29,762 SF. Vacancy rates declined to 10.3% as average rental rates increased to $36.19/SF. A major development was Apple's announcement of a 3,000,000 SF campus in North Austin, which will boost the submarket and Austin's economy. New construction is booming, with 4.26M SF under construction and expectations of continued growth in 2019.
1) More tenants are choosing to relocate to newer, higher-quality office space rather than renewing leases in their current buildings, increasing competition among landlords. While only 6% of the Washington metro area's office space was recently built or renovated, 21% of relocations since 2013 have been to new or renovated spaces.
2) The percentage of leases signed that were for tenant relocations rather than renewals/expansions increased from 54% in 2013 to 66% in 2015 year-to-date, indicating more tenant mobility.
3) On average, tenants are actually signing leases for 2% more space than they had originally planned, counter to expectations of densification trends reducing
The document discusses positive trends in the Philippine real estate market, particularly in Metro Manila. It notes that strong economic growth and a robust real estate sector have led developers to increase investments within and outside of Metro Manila. Improvement in tourism is increasing hotel rooms and boosting the gaming sector. Foreign manufacturers are also showing increased interest in locating to the Philippines. The ASEAN Economic Community is seen as a driver of future growth. Overall occupancy rates remain high in government-managed economic zones. The document then examines trends in various real estate sectors, including steady growth in the office, residential, industrial and retail markets in Metro Manila due to factors like a strong services sector, increased BPO activity, and robust consumer sentiment.
This document discusses three megatrends - globalization, demographic shifts, and flexible working - that are changing commercial real estate investment. It describes how globalization is increasing capital flows and creating new investment opportunities. Demographic trends like population aging are impacting real estate sectors. The rise of flexible working arrangements and co-working spaces represents an opportunity for investors. The document promotes a co-working investment opportunity offering high returns through a rapidly expanding co-working provider.
This document discusses three megatrends - globalization, demographic shifts, and flexible working - that are impacting commercial real estate investment. It outlines how globalization is increasing capital flows and opening new markets. Demographic trends like population aging are shaping consumer demand. Flexible working arrangements are fueling rapid growth in co-working office spaces. The document then describes an investment opportunity in a co-working real estate company that aims to harness these megatrends through global expansion.
The downtown Calgary office market continued to decline in Q1 2016, with high vacancy, falling rental rates, and negative net absorption. The vacancy rate increased to 15.4% while average asking rental rates fell to $17.74 per square foot. Net absorption was also negative at 1.2 million square feet. These trends are expected to continue through 2016 due to high sublease space and new construction delivering to the market with vacancies. While the bottom of the decline may be nearing, market conditions are still projected to worsen in the near term.
Tech companies continue to drive growth in Austin's tight office market. Net absorption was 528,811 SF in Q2 2019 despite increasing vacancy. Rents rose to $35.74/SF citywide with several submarkets exceeding $50/SF. New supply is under construction but largely pre-leased, indicating demand will remain strong through 2020 barring economic slowdowns.
Rental growth was recorded across all office grades in Ho Chi Minh City in the first quarter of 2016. Grade A average asking rents increased 1.92% while Grade B surged 5.1%, though average occupancy rates witnessed a downward trend. No new office buildings entered the market, while the supply pipeline included 11 Grade A and 57 Grade B buildings. Grade B will see most new supply in coming quarters, while 4 new Grade A buildings after 2018 will substantially increase stock. Strong foreign direct investment is expected to continue driving office demand from foreign enterprises.
Atlanta's office market rebounded
in the fourth quarter of 2018 after
two consecutive quarters of negative
absorption. Leasing activity well ahead
of 2017's pace allowed the market to
record the second strongest quarter of
absorption since 2015. As the market
moves in a positive direction, vacancy
rates will continue to decline while rental
rates increase at a faster pace.
The document provides an overview of the Austin office market in Q1 2020. It summarizes that the market saw 35,453 SF of negative net absorption in Q1, with large negative absorption in Class A buildings. Vacancy increased to 13.0% citywide. Rental rates increased slightly to $35.93 on average. The report also discusses the impacts of COVID-19 on the market and expectations for Q2 2020.
- Office rents in Ho Chi Minh City remained stable in Q3 2015, while occupancy increased to an average of 94% due to new supply. Grade A and B office rents increased to US$40/sqm/mth and US$24/sqm/mth respectively in the city center.
- The retail market saw average asking rents increase to US$59/sqm/mth in the CBD. New shopping centers added over 100,000 sqm of supply. Occupancy declined slightly to 92% for shopping centers.
- Residential sales volumes increased 88% YoY in Q3 2015 to nearly 8,000 units. Average primary prices rose 2.5% while the luxury segment
Leasing volume has been stuck in neutral for several quarters. Nevertheless, activity in the Midtown, Central Perimeter, North Fulton and Northwest remains steady with corporate relocations boosting demand as well.
Lee & Associates is a commercial real estate firm with 887 agents and $12 billion in annual transaction volume. It has offices across the US and Canada. The document summarizes key industrial real estate market trends in 2016, including declining vacancy rates, strong demand from e-commerce companies, record acquisition prices, and rising rents. It predicts the industrial market will continue expanding in 2017 due to a growing US economy and steady demand for distribution space.
-U.S. Office Market Was Driven by the Tech
Sector in the Fourth Quarter of 2018
-Absorption exceeds construction completions, vacancy
declines and the pipeline grows
-Tech markets tighten
-Rents rise, but the pace slows:
KMC MAG Group and its international associate, Savills, releases its bi-annual Asian Cities Report for Manila Office. The report, which covers the second half of 2015, features key market updates on the local office sector.
The trade, transportation and utilities sector added the most jobs (2,200) in San Diego County in December 2016, contributing to a decrease in the unemployment rate. Overall, 28,900 jobs were added in 2016, a 2% annual increase. San Diego has a diverse economy led by government, professional services, healthcare, retail, and hospitality. Strong employment growth is fueling demand across commercial real estate sectors, including positive net absorption in the office, industrial, and retail markets with declining vacancy rates.
The Savills Studley report summarizes commercial real estate trends in the Los Angeles office market in Q4 2016. Key points include: leasing activity declined slightly from the previous quarter but exceeded 2015 levels; availability rates declined while asking rents remained flat; and office property sales sharply increased from the previous year. The recovery is showing signs of moderating heading into 2017 as leasing activity and hiring slow, though conditions remain tight on the Westside and opportunities exist elsewhere in the market.
The Houston office market continued to contract in Q4 2020 with negative absorption of 836,140 square feet. Vacancy rates increased to 21.7% as the COVID pandemic continued to impact the market. Rental rates remained steady while landlord concessions became more aggressive. The outlook remains uncertain depending on vaccine distribution and return to office trends.
Austin's office market saw positive net absorption of 163,796 SF in Q4 2018, bringing the year-to-date net absorption to 29,762 SF. Vacancy rates declined to 10.3% as average rental rates increased to $36.19/SF. A major development was Apple's announcement of a 3,000,000 SF campus in North Austin, which will boost the submarket and Austin's economy. New construction is booming, with 4.26M SF under construction and expectations of continued growth in 2019.
1) More tenants are choosing to relocate to newer, higher-quality office space rather than renewing leases in their current buildings, increasing competition among landlords. While only 6% of the Washington metro area's office space was recently built or renovated, 21% of relocations since 2013 have been to new or renovated spaces.
2) The percentage of leases signed that were for tenant relocations rather than renewals/expansions increased from 54% in 2013 to 66% in 2015 year-to-date, indicating more tenant mobility.
3) On average, tenants are actually signing leases for 2% more space than they had originally planned, counter to expectations of densification trends reducing
The document discusses positive trends in the Philippine real estate market, particularly in Metro Manila. It notes that strong economic growth and a robust real estate sector have led developers to increase investments within and outside of Metro Manila. Improvement in tourism is increasing hotel rooms and boosting the gaming sector. Foreign manufacturers are also showing increased interest in locating to the Philippines. The ASEAN Economic Community is seen as a driver of future growth. Overall occupancy rates remain high in government-managed economic zones. The document then examines trends in various real estate sectors, including steady growth in the office, residential, industrial and retail markets in Metro Manila due to factors like a strong services sector, increased BPO activity, and robust consumer sentiment.
This document discusses three megatrends - globalization, demographic shifts, and flexible working - that are changing commercial real estate investment. It describes how globalization is increasing capital flows and creating new investment opportunities. Demographic trends like population aging are impacting real estate sectors. The rise of flexible working arrangements and co-working spaces represents an opportunity for investors. The document promotes a co-working investment opportunity offering high returns through a rapidly expanding co-working provider.
This document discusses three megatrends - globalization, demographic shifts, and flexible working - that are impacting commercial real estate investment. It outlines how globalization is increasing capital flows and opening new markets. Demographic trends like population aging are shaping consumer demand. Flexible working arrangements are fueling rapid growth in co-working office spaces. The document then describes an investment opportunity in a co-working real estate company that aims to harness these megatrends through global expansion.
The downtown Calgary office market continued to decline in Q1 2016, with high vacancy, falling rental rates, and negative net absorption. The vacancy rate increased to 15.4% while average asking rental rates fell to $17.74 per square foot. Net absorption was also negative at 1.2 million square feet. These trends are expected to continue through 2016 due to high sublease space and new construction delivering to the market with vacancies. While the bottom of the decline may be nearing, market conditions are still projected to worsen in the near term.
Tech companies continue to drive growth in Austin's tight office market. Net absorption was 528,811 SF in Q2 2019 despite increasing vacancy. Rents rose to $35.74/SF citywide with several submarkets exceeding $50/SF. New supply is under construction but largely pre-leased, indicating demand will remain strong through 2020 barring economic slowdowns.
Rental growth was recorded across all office grades in Ho Chi Minh City in the first quarter of 2016. Grade A average asking rents increased 1.92% while Grade B surged 5.1%, though average occupancy rates witnessed a downward trend. No new office buildings entered the market, while the supply pipeline included 11 Grade A and 57 Grade B buildings. Grade B will see most new supply in coming quarters, while 4 new Grade A buildings after 2018 will substantially increase stock. Strong foreign direct investment is expected to continue driving office demand from foreign enterprises.
Atlanta's office market rebounded
in the fourth quarter of 2018 after
two consecutive quarters of negative
absorption. Leasing activity well ahead
of 2017's pace allowed the market to
record the second strongest quarter of
absorption since 2015. As the market
moves in a positive direction, vacancy
rates will continue to decline while rental
rates increase at a faster pace.
The document provides an overview of the Austin office market in Q1 2020. It summarizes that the market saw 35,453 SF of negative net absorption in Q1, with large negative absorption in Class A buildings. Vacancy increased to 13.0% citywide. Rental rates increased slightly to $35.93 on average. The report also discusses the impacts of COVID-19 on the market and expectations for Q2 2020.
- Office rents in Ho Chi Minh City remained stable in Q3 2015, while occupancy increased to an average of 94% due to new supply. Grade A and B office rents increased to US$40/sqm/mth and US$24/sqm/mth respectively in the city center.
- The retail market saw average asking rents increase to US$59/sqm/mth in the CBD. New shopping centers added over 100,000 sqm of supply. Occupancy declined slightly to 92% for shopping centers.
- Residential sales volumes increased 88% YoY in Q3 2015 to nearly 8,000 units. Average primary prices rose 2.5% while the luxury segment
Leasing volume has been stuck in neutral for several quarters. Nevertheless, activity in the Midtown, Central Perimeter, North Fulton and Northwest remains steady with corporate relocations boosting demand as well.
Lee & Associates is a commercial real estate firm with 887 agents and $12 billion in annual transaction volume. It has offices across the US and Canada. The document summarizes key industrial real estate market trends in 2016, including declining vacancy rates, strong demand from e-commerce companies, record acquisition prices, and rising rents. It predicts the industrial market will continue expanding in 2017 due to a growing US economy and steady demand for distribution space.
-U.S. Office Market Was Driven by the Tech
Sector in the Fourth Quarter of 2018
-Absorption exceeds construction completions, vacancy
declines and the pipeline grows
-Tech markets tighten
-Rents rise, but the pace slows:
KMC MAG Group and its international associate, Savills, releases its bi-annual Asian Cities Report for Manila Office. The report, which covers the second half of 2015, features key market updates on the local office sector.
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Behind San Diego’s Thriving Office Market
| By Carrie Rossenfeld
Published: November 10, 2016
Brett Ward
SAN DIEGO—Continued economic and job growth is driving occupancy and rent growth in the San Diego
office market, a trend that is expected to continue in 2017, Cushman & Wakefield’s managing director,
office division, Brett Ward and director of research, San Diego region, Jolanta Campion tell GlobeSt.com.
According to the firm’s Q3 office-market report, the region has experienced another meaningful decline in
vacancy as the market continued to shed space. Overall office vacancy in San Diego fell to a rate of 15.1% in
3Q 2016, reaching its lowest point in exactly nine years.
The report also revealed that after a sluggish start to 2016, the San Diego office market has maintained
steady growth over the past two quarters since vacancy declined by 40 basis points in Q3 and 10 bps in Q2.
The market recorded 664,500 square feet of occupancy growth across all classes in Q3, with the North,
Central and South County regions all reporting positive net absorption, led by Central County with nearly
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2. 363,500 square feet.
We spoke exclusively with Ward and Campion about what is driving growth in the San Diego office market
and where they see this heading next year.
GlobeSt.com: What is driving absorption and growth in the San Diego office market?
Ward and Campion: Continued economic and job growth is driving occupancy and rent growth in 2016, a
trend that is expected to continue in 2017. A few key economic outlook indicators to mention include:
• Employment in the healthcare sector is forecasted to grow 4.5% in 2016 and 3.1% in 2017,
positively affecting demand for office space.
• Office employment is forecasted to grow 4.0% in 2016 and 4.2% in 2017.
• All employment sectors are expected to grow over the next two years at a combined rate of 2.4% in
2016 and 2.1% in 2017.
• Unemployment rate in San Diego was 5% as of August, 100 bps below the 26-year average of 6%,
and is forecasted to drop to 4.6% by end of 2016 and 4.4% by end of 2017.
• San Diego’s economy grew 3.2% in 2015 – above the 10-year average growth rate of 1.3% and is
forecasted to grow 3.6% in 2016 and 3.8% in 2017, according to Moody’s Analytics economy.com
forecast.
One of the major commercial real estate drivers has been the expansion of life-sciences and healthcare
companies in San Diego, including significant activity from major occupants such as Eli Lilly and Illumina.
Jolanta Campion
GlobeSt.com: Where do you see absorption and growth heading as we finish out the year and move into
2017?
Ward and Campion: We expect to see modest and steady absorption growth going forward, resulting in a
continued modest decline in countywide vacancy.
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3. There are a number of large leases that were signed in previous quarters that will help further boost
absorption in future quarters as these tenants begin officially taking occupancy. In Downtown, the co-
working venture WeWork will occupy 88,000 square feet at 600 B St. In Eastgate and UTC, Ignyta will
move into 95,000 square feet at Axiom, and Jones Day will occupy 60,000 square feet at One La Jolla
Center. In Governor Park, UCSD will move into 74,000 square feet this fall. The University of Southern
California signed a 41,000-square-foot lease in Sorrento Mesa to occupy in 2017.
Much of future absorption also stems from leases signed for new development projects currently still under
construction. Again, once official occupancy takes place, our absorption figures should see a generous
boost. In addition to a 296,000-square-foot build-to-suit, Illumina also leased the entire 316,000 square feet
at Biomed Realty’s i3 in Eastgate, a positive sign of the impact biotechnology and healthcare companies
have on San Diego’s economy. Additionally, Eli Lilly is expanding into 304,000 square feet in Campus
Point. Otonomy will occupy a 62,000-square-foot build-to-suit building for its new headquarters at 4796
Executive Dr. in Eastgate. The second Spectrum Lab building in Torrey Pines is expected to be completed
at 3013 Science Park Rd. and occupied by the Medicines Co. later this year. Meanwhile, Sharp will
occupy a 100,000square-foot building in Rancho Bernardo in 2017.
Leasing within the 5,000- to 30,000-square-foot range should remain the primary driver of future activity,
accounting for 44% of total square footage in lease obligations set to expire over the next 18 months. Leases
30,000 square feet and larger will account for 31% of activity, while leases 5,000 square feet and less will
account for 25%.
GlobeSt.com: What new trends do you see emerging in this market?
Ward and Campion: We have reached the time when the Millennial (1.1 million people) generation has
surpassed Baby Boomers (744,033 people) in San Diego, as well as California and the US. The Millennial
generation, also known as Gen Y (ages 15 to 34), is the largest age group in San Diego County, representing
1.02 million people or 31% of the total population of 3.3 million countywide. More than a half or 53% of
Gen Y are of the prime age (ages 25 to 34) influencing trends and demand for modern and amenity-rich
office projects.
Consequently, companies trying to recruit and retain the very best talent are expected to provide an amenity-
rich environment for their employees in submarkets close to residential areas. Millennials prefer to be close
to public transportation and favor locations that support the quality of life that San Diego has to
offer—enjoying the sunshine in outdoor areas, being in walkable areas near shopping and childcare, working
out at the gym in or near the office and having plenty of farm-to-table and chef-focused restaurant choices
among other amenities.
Co-working is gaining momentum driven by the Millennial generation’s desire to connect to community
and network with other companies while working in the same environment.
GlobeSt.com: What else should our readers know about the nine-year low in vacancy?
Ward and Campion: With a decreasing vacancy, demand on the upswing and rents on the rise, market
conditions are ideal for speculative development. This coupled with the fact that more than 66% of the
county’s office inventory was built before 1990, bodes well for continued strong demand of new, functional
facilities. Further exemplifying the stability and desirability of the San Diego office market, more than
741,400 square feet of new office product has been delivered through the first three quarters of 2016.
This trend is being driven by modern creative-office-type buildings, which remain in short supply but in
high demand. As a result, we are also seeing an increasing trend of renovations of older product—the
modernization of dated office and R&D buildings—to make them more appealing to tenants. This has been
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4. another factor contributing to office rent growth since the increased cost of construction compared to the
previous cycle warrants higher rental rates.
The San Diego life-sciences sector is the hottest it has ever been, and we have witnessed an unprecedented
increase in activity and overall expansion of the life-sciences tenant base. This explains why the majority of
projects currently under construction are built-to-suit with tenant commitment in place.
Consequently, overall preleasing rate for buildings under construction has increased from 40% in the last
three years (2012 to 2014) to 80% in 2016.
Tenant demand has, until recently, been predominately focused on class-A space. Class-A leasing has been
positive for the last 26 of 29 quarters since the end of the recession, during which tenants absorbed a total of
5.7 million square feet, an average of 197,000 square feet per quarter. In 2015, tenants absorbed close to 1
million square feet of class-A space countywide, above the 10-year annual average of the 730,000 square
feet. Class-A performance in Q3 was robust at more than 255,000 square feet compared to a quarterly
average of 227,000 square feet in 2015. We continue to see steady touring and deal flow from class-A
projects. Since peaking at 23% seven years ago, class-A vacancy has fallen 650 bps to 16.5%.
As class-A availability in key submarkets has become more constricted and asking rents have increased,
class-B leasing has picked up notably. Class-B occupancy growth in Q3 was 309,000 square feet, more than
twice the quarterly average of 120,000 square feet in 2015. One year ago, class-B vacancy stood at 16.4%,
whereas it now stands at its lowest level in nearly a decade at 14.4%. Tenants had absorbed 483,000 square
feet of class-B space in 2015, while 2016 is set to be the fifth consecutive year of positive occupancy for
class B, with nearly 495,000 square feet already absorbed year-to-date. Class B struggled for six years—long
before and after the last recession—returning 2.2 million square feet combined between 2006 and 2011.
Since 2012, tenants have backfilled close to 1.9 million square feet of class-B space, recovering nearly 90%
of space returned to the market during the last recession.
Interestingly, rents are growing faster for class B than A because there was a significant delta/pricing gap
between class A and B during the post-recession years.
Copyright 2016. ALM Media Properties, LLC. All rights reserved.
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