SAN DIEGO-AHZ Company Inc. has acquired a 32,659-sf office building for $5.6 million that is 100% occupied by the State of California Employment Development Department, another sign of the continued strong demand for fully leased investments in all product types in Southern California. The EDD is in the building, which was built in 1987 and is situated on 1.5 acres at 8977 Activity Rd., in a lease that runs until September 2009, according to CB Richard Ellis, which brokered the sale.

Paul Lafrenz and Don Mitchell of the CBRE Private Client Group’s San Diego Central office, along with Doug Matheson of the CB Richard Ellis Investment Properties Group, represented the seller, a partnership doing business as LMIP-2&3. The buyer was represented by Kendra Parda and Roger Bashara of Century 21, Beach & Inland Realtors.

The Activity Road transaction illustrates one of the continuing contrasts in the office sales world versus the office leasing market in Southern California, where office leasing in general has been picking up but remains spotty in some areas. Office buildings continue to sell briskly, both those that are fully occupied and those that represent value-added plays, but leasing flattened in San Diego in the first quarter, according to the latest report from CBRE.

The report showed that the county’s office vacancy rate crept up to 9.8% in the quarter, compared with 9.7% at the end of 2004. The first quarter rise represented only a blip in comparison with the market’s performance in 2004, when the vacancy dropped by nearly three percentage points, according to the CBRE report. The report also notes that despite the slight flattening and relatively little absorption in the first quarter, average asking lease rates continued to climb, reaching $2.03 compared with $1.94 in the previous quarter.

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