SAN DIEGO-A new report says that strong demand from local high-tech and biotech firms has pushed the county’s office vacancy rate to a record low of 5.4%.

The vacancy factor at the start of the third quarter was barely half the level of 10.3% reported a year ago, according to the new report by real estate services giant Grubb & Ellis. Absorption totaled more than 2.7 million sf in the first half of this year, greater than the total absorption in all of 1999.

“Tenants of all sizes will be faced with a tremendous challenge in theirsearch for new space,” says David O’Rell, research analyst for Grubb & Ellis. “With only 1.9 million sf under construction,the number of opportunities will remain rather limited—especially fortenants requiring more than 20,000 sf.”

The consolidation of dot-com ventures apparently hasn’t chilled the market, O’Rell adds. The amount of space available for sublease by companies that have pulled out of a building has held steady at about 300,000 sf, he says.

The dropping vacancy factor is pushing lease rates up quickly. In hot submarkets such as Del Mar and University City, monthly askingrates have surpassed $3 psf full service. In some micro-markets, ratesare rising 5 or even 10 cents psf per month, O’Rell adds.

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