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SAN DIEGO-Office and industrial vacancy rates dropped as the San Diego County economy remained strong during the third quarter and continued to add jobs, according to a new report.

Biotech and telecommunications are leading the charge in the county, where forecasters are optimistic that the expansion will continue well into the next year, Jerry Holdner, VP of marketing for Voit Commercial Brokerage, tells GlobeSt.com.

The local economy added an estimated 36,000 jobs in 1999 and is on pace to add another 30,000 in 2000. San Diego County’s jobless rate was 3% in September–a command performance compared to the state’s already low rate of 4.8%.

Even with the expectation of an economic slowdown and new construction waning, demand still remains strong, as evidenced by the almost 7.7 million sf of industrial, research & development and office absorption this year.

“The majority of this absorption can be attributed to businesses in San Diego county expanding, along with some new and start-up businesses coming in,” Holdner says.

The industrial market’s third-quarter vacancy rate fell to 6.36%, which will likely mean a 5% to 7% price hike over the next year for both lease and sale property, Holdner says. Currently, there is more than one-million sf of industrial space under construction and another 1.55-million sf in the planning pipeline.The R&D market also continues to grow, with vacancy rates below 10%, even though new space has been added at a record clip in recent quarters. Most speculative developments are now staying on the drawing board until more space is pre-leased, Holdner says.

Vacancy rates continued their downward spiral in the third quarter to 5.66%, despite an explosion in new construction.

“These impressive figures should put pressure on pricing over the next year, and we should see lease and sale rates increase by at least 5% over the next 12 months,” Holdner says. “The current average asking lease rate for office product in San Diego County is $2.02 per sf on a full-service gross basis, breaking the $2 mark for the first time.”

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