Q1 Office Sales Top $453M in San Diego

SAN DIEGO—The San Diego office-sales market is on track to top last year's volume, particularly in the Carlsbad submarket, where more than 25% of the stock is expected to trade hands this year, according to CBRE's EVP Louay Alsadek. Overall sales transactions in San Diego for the first quarter exceeded $453 million, the firm reports.

As GlobeSt.com recently reported, Alsadek spoke to us exclusively about the Carlsbad office market, saying, “The Carlsbad market's office vacancy has continued to drop, and a lot of landlords—especially for B+/A- buildings—are feeling very positive and have started increasing rents, which is improving the value. Rents in Carlsbad have been going up, which translates to higher values. We also haven't seen any new construction or new spec construction in Carlsbad, which is really what hurt the market in the last cycle.”

Now, Alsadek says, the San Diego office market as a whole has seen “tremendous activity throughout the county and especially in Carlsbad, where current activity and trends project that more than 25% of the Carlsbad office market will trade this year.”

Partly responsible for the county's office growth is the fact that San Diego's job growth beat the national average in Q1, with total employment growing by more than 3% year-over-year, surpassing the national growth rate of 2.4%, according to CBRE Research. The market was also strengthened by a notable volume of sales, leasing activity, strong positive net absorption and an increase in overall asking rates. San Diego's unemployment rate has dropped to 5.3%, the lowest level since April 2008, and 39,700 jobs have been added year-over-year, with jobs in professional- and business-services fields making up nearly one-quarter of that total.

Overall asking lease rates in San Diego increased to $2.45, which is 6.5% less than the peak in Q2 2008, and the positive net absorption totaled 233,853 square feet in Q1, validating the strong office market. The majority of this quarter's positive net absorption can be attributed to substantial transactions completed in the I-15 corridor, including Daybreak Game Co., Turtle Beach Corp. and MedImpact, CBRE reports.

According to Ryan Egli, first VP at CBRE in San Diego, “The I-15 corridor continued to perform very well, with strong activity in the class-B sector. Given the continued strong absorption, several class-B projects have benefited, with increased rental rates on lease transactions such as Bernardo Heights Corporate Center and Bernardo Executive Center.”