Cushman & Wakefield Releases New Q2 Report, plus Five Fast Facts Infographic
SAN DIEGO, Calif., July 23, 2019 – Cushman & Wakefield’s research department has released their second quarter 2019 office market report for San Diego. Below are the key findings from this report plus local expert commentary:
SECOND QUARTER FUELS FIRST HALF OCCUPANCY GROWTH IN 2019
Tenants absorbed 448,000 square feet (sf) on a net basis in the second quarter of 2019, bringing total occupancy growth at midyear to 647,000 sf. The first six months of 2019 have virtually doubled the 342,000 sf of growth seen in the first six months of 2018. Central County (positive 475,000 sf) and North County (positive 434,000 sf) are leading the growth thus far in 2019.
Jolanta Campion, Cushman & Wakefield’s Director of Research for San Diego, notes, “With the exception of the fourth quarter of 2018—when tenants returned a modest 96,000 sf—this marked the 19th consecutive quarter of positive absorption. Gains in the second quarter were driven by a number of large occupancies, namely from companies such as ViaSat, Encore Capital, Qdoba, DJO, Sorrento Therapeutics, and Curology.”
VACANCY FALLS WHILE RENTS REACH NEW HIGHS
San Diego’s overall office vacancy declined by 30 basis points during the second quarter to 13.7%. Vacancy, however, is still up by 110 basis points from midyear 2018 primarily as a result of 1.2 million square feet (msf) of inventory delivered over the last year.
Campion said, “The second quarter of 2019 marked the first quarter of decreasing vacancy since a year ago (Q2 2018).”
The average weighted asking rent for all classes is now $3.19 psf on a monthly full service basis, up 5.6% from a year ago. Year over year, Class A average rent has increased by 6.1% to $3.64 psf while the Class B rate has increased by 8.9% to $3.06 psf.
Derek Hulse, Managing Director with Cushman & Wakefield, said, “Projects such as One Paseo in Del Mar, DiamondView in Downtown and Amp&rsand in Mission Valley are achieving rents never seen before in their respective markets. It is compelling evidence tenants are willing to pay premium rents for the projects that deliver a unique and amenity rich environment.”
There are 12 office properties totaling nearly 1.8 msf currently under construction countywide. Of this total, 724,000 sf are expected to be delivered in 2019.
Derek Hulse said, “Nearly 630,000 sf, or 36%, of total inventory under construction is in Downtown. Tower 180, the Paladion and Kettner & Ash will all be delivered by Q4 2019/Q1 2020 and will add significant available space to the Downtown submarket, but developers remain bullish on future tenant demand.”
Additionally, there are three other office projects in Downtown anticipated to begin construction over the next 12 months.
INCREASE IN TRADE VOLUME
Sales volume reached $798M in Q2 2019, largely due to the $514M sale of La Jolla Commons at $709 psf – a price surpassed only by last year’s sale of Paseo Del Mar ($715 psf). Year-to-date 2019, sales volume has reached $1.1B, a 19% increase from mid-year 2018.
Campion said, “REITs (50%) and private buyers (29%) have been the leading buyers while institutional (57%) and private investors (33%) have been the leading sellers of office properties as of mid-2019.”
Sorrento Mesa will continue to benefit from life sciences and pharmaceutical companies as TriLink BioTechnologies will occupy 100,000 sf by the end of the year. Pacira Pharmaceuticals signed a lease to occupy 94,000 sf in Torrey Pines. In Campus Point, AveXis and Truvian Sciences each have signed leases for 34,000 sf.
Ted Jacobs, Executive Managing Director with Cushman & Wakefield, said, “Developers have been eager to purchase and redevelop obsolete office or industrial projects in the Central County submarkets to accommodate life science and biotech companies. The existing available supply has been significantly reduced, while tenant demand from this industry sector remains at all-time highs.”
Click links below to download Q2 2019 reports
About Cushman & Wakefield
Cushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with approximately 51,000 employees in 400 offices and 70 countries. In 2018, the firm had revenue of $8.2 billion across core services of property, facilities and project management, leasing, capital markets, valuation and other services. To learn more, visit www.cushmanwakefield.com or follow @CushWake on Twitter.