Unlike the early 1990s, when San Diego County plunged into what would become a prolonged recession, the region entered 2002 with a significantly more diversified economy, a lack of overbuilding, comparatively low unemployment rates and many of its recession-related closures and cutbacks already accounted for, according to CoStar's year-end office report for San Diego County.

"San Diego is faring relatively well when compared to other markets," said Erin Miller, CoStar research manager for San Diego. "We are watching the overall real estate and economic market indicators to see how the 2002 economic picture shapes up, but barring any unforeseen events, expect the region to remain fairly stable."

By the end of the first quarter, newly delivered product is projected to have a 68% pre-leasing rate, and a 54% pre-leasing rate in the second quarter.

About half of the new space in the San Diego markets occurred in the North Cities market--La Jolla, North University City, Miramar, Governor Park, Torrey Pines/Sorrento Valley and Del Mar Heights. Carlsbad and north beach cities, and Downtown/central San Diego, each received about 20% of the new space.

The largest amount of space under construction at year-end was in the Interstate 15 corridor--Scripps Ranch, Rancho Bernardo, Poway and Escondido. However, construction starts have decreased from 2.6 million sf in 2000 to 1.7 million sf at year-end 2001.

Decreasing construction starts will cause a significant drop in deliveries in 2002 and 2003--only 1.4 million sf is projected to come online in 2002.

The overall amount of vacant office space was 11.3%--up from the 8.3% vacancy a year earlier. Countywide, class A vacancies doubled over the course of the year, ending at 14%.