SAN DIEGO—Traditional San Diego office users such as finance, professional and business-services companies are starting to jump aboard the creative “train” and are seeking more creative-office to house their firms, Newmark Grubb Knight Frank's senior managing director Steve Bruce tells GlobeSt.com. As we recently reported, Bruce and Chris High, also senior managing director, have joined NGKF to expand the firm's presence throughout San Diego County, as well as nationally, in the areas of landlord representation, tenant representation and investment sales exclusively for the office-property sector. We spoke exclusively with the pair about trends they are noticing in the San Diego office market.
GlobeSt.com: What trends are you noticing in the San Diego office market?
Bruce: Tenant-focused amenities are in high demand. Older projects are taking a back seat to newly constructed or heavily repurposed assets with gourmet kitchens, state-of-the-art fitness facilities and thoughtfully designed office space. Tenants are paying upward of a 10% rent premium without batting an eye to house their company at this type of space. Companies such as Cruzan, Alexandria Real Estate Equities, Kilroy Realty and TIAA have invested heavily into delivering this type of asset to the San Diego market.
GlobeSt.com: Are you seeing any shifts in the types of users taking office space now?
Bruce: We have not seen a shift in the type of users taking space, but rather in the type of space users are taking. While the tech sector continues to lead the charge in seeking thoughtfully designed, amenity-rich office space, traditional office users such as finance, professional, and business services companies are starting to jump aboard the creative “train” and are seeking more creative office space as well to house their firms. These groups, which have historically chosen a more-traditional corporate look, are eager to bring a new vibe to their work environment.
GlobeSt.com: What else should our readers know about the San Diego office market?
High: San Diego continues its trend of positive absorption and increasing rates. Class-B space is the clear winner when surveying YTD net absorption gains, recording 551,107 square feet in positive net move-ins, whereas class-A space experienced 213,698 square feet of absorption. The current direct office vacancy rate is 9.9%; 120 basis points less than last cycle's low of 11.1% in 2007. Despite the last few months having been flat, we anticipate Q416 to heat up again, with 2016 closing out strong and the first half of 2017 to continue on a positive path.
SAN DIEGO—Traditional San Diego office users such as finance, professional and business-services companies are starting to jump aboard the creative “train” and are seeking more creative-office to house their firms, Newmark Grubb Knight Frank's senior managing director Steve Bruce tells GlobeSt.com. As we recently reported, Bruce and Chris High, also senior managing director, have joined NGKF to expand the firm's presence throughout San Diego County, as well as nationally, in the areas of landlord representation, tenant representation and investment sales exclusively for the office-property sector. We spoke exclusively with the pair about trends they are noticing in the San Diego office market.
GlobeSt.com: What trends are you noticing in the San Diego office market?
Bruce: Tenant-focused amenities are in high demand. Older projects are taking a back seat to newly constructed or heavily repurposed assets with gourmet kitchens, state-of-the-art fitness facilities and thoughtfully designed office space. Tenants are paying upward of a 10% rent premium without batting an eye to house their company at this type of space. Companies such as Cruzan, Alexandria Real Estate Equities, Kilroy Realty and TIAA have invested heavily into delivering this type of asset to the San Diego market.
GlobeSt.com: Are you seeing any shifts in the types of users taking office space now?
Bruce: We have not seen a shift in the type of users taking space, but rather in the type of space users are taking. While the tech sector continues to lead the charge in seeking thoughtfully designed, amenity-rich office space, traditional office users such as finance, professional, and business services companies are starting to jump aboard the creative “train” and are seeking more creative office space as well to house their firms. These groups, which have historically chosen a more-traditional corporate look, are eager to bring a new vibe to their work environment.
GlobeSt.com: What else should our readers know about the San Diego office market?
High: San Diego continues its trend of positive absorption and increasing rates. Class-B space is the clear winner when surveying YTD net absorption gains, recording 551,107 square feet in positive net move-ins, whereas class-A space experienced 213,698 square feet of absorption. The current direct office vacancy rate is 9.9%; 120 basis points less than last cycle's low of 11.1% in 2007. Despite the last few months having been flat, we anticipate Q416 to heat up again, with 2016 closing out strong and the first half of 2017 to continue on a positive path.
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