SAN DIEGO—Like much of California, San Diego's fourth-quarter office sales activity cooled down in Q4 2017 after a strong Q3, and Yardi-Matrix's director of business intelligence Doug Ressler tells GlobeSt.com that sales will continue to erode from the highs of 2016.

According to a recent report from the firm, Los Angeles was the only California market to see an increase in its average price per square foot, reaching $469 in Q4. San Francisco came in second with $464, followed by the Bay Area with $293 at No. 3, with San Diego ($252) and Sacramento ($184) closing the list. And, in terms of sales volume and number of deals closed in the last quarter, San Diego came in at No. 3, with $407 million across 10 transactions.

We spoke with Ressler about the factors driving San Diego's office growth and what he expects to see down the road.

GlobeSt.com: Do we expect this volume of office sales to continue in 2018 and beyond?

Ressler: Certainly, we believe the new tax policy will encourage owners to resume sales activity. However, office-producing jobs are flat in San Diego, and owners are resorting to concessions to maintain occupancy. We project that San Diego sales in 2018 will continue to erode from highs in 2016.

GlobeSt.com: What are the factors driving these sales in this market?

Ressler: San Diego has a growing med-tech industry, especially in the Torrey Pines submarket. Current San Diego vacancy is at 12. Factors influencing this are a lack of land for development opportunities, which has limited construction over the last several years: only 53,000 square feet of new supply is scheduled for the CBD (from one project: Makers Quarter), and four additional projects totaling 805,000 square feet are scheduled for suburban markets, meaning that overall San Diego new supply will add less than 900,000 square feet.

GlobeSt.com: What could derail the momentum of office sales in San Diego?

Ressler: Continued land-use restrictions, the lack of available land (especially in the urban core) and a static employment picture for the San Diego market will continue to impact and result in reduced supply (less than 2% of existing stock) in the next 24 months.

GlobeSt.com: What else should our readers take away from this report?

Ressler: Urban centers present rich technical diversity and walkability potential, which will draw new office space projects. The advent of the changing technology and societal work/live (co-working space) behavior regarding transportation and transit-oriented-development will be seen first in the gateway markets, which San Diego represents.

Instant Insights /

What's Happening With SD Office Sales Volume?

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