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[IMGCAP(1)]SAN DIEGO-Studley has promoted Mike Labelle and T.D. Rolf both to senior vice presidents and has named the two new SVPs as co-managers of the company’s San Diego office. Labelle is a 20-year industry veteran who has represented corporate tenants in more than eight million square feet of transactions throughout his career, and Rolf was a corporate attorney at both a major law firm and a public company before joining Studley.

[IMGCAP(2)]Labelle says that the new branch managers aim to expand Studley’s approach to corporate real estate within the San Diego marketplace, where his clients include Sharp HealthCare, the Eastridge Group and McDermott Will & Emery. Some of Rolf’s clients include Nike, the City of San Diego, Robbins Umeda and Cadence Pharmaceuticals.

Labelle and Rolf step into their new roles at a time when office leasing in the San Diego market is lackluster despite generous tenant concessions, according to Studley’s latest quarterly market survey. The survey notes that, among other concessions, some landlords are offering free rent of up to 12 months for long-term transactions.

Leasing activity totals fell “significantly below the market’s historical averages” during the third quarter, according to the San Diego Studley report, which covers conditions in the city and surrounding areas. Rolf points out that, as landlords face increasing pressure to generate cash flow, concession packages continue to increase. “In addition, landlords are demonstrating considerable flexibility and creativity in an effort to retain and attract tenants,” Rolf says. Some of the landlords’ offers include sizeable turn-key tenant-improvement allowances with the option to apply unused portions to moving costs, data/phone cabling and payment of base rent, as well as presenting early renewal and short-term options.

While many companies are proceeding very cautiously and renewing rather than relocating, some tenants are taking advantage of current market opportunities to capture high-quality office space at very advantageous terms. For example, the law firm of Robbins Umeda signed a new lease earlier this year for 29,014 square feet of office space at 600 B St., increasing its visibility, improving its space efficiency, and expanding its square footage by 25%, the Studley report points out.

Labelle cites one area of “increasing interest and above-average activity” in the form of LEED-certified buildings. Tenants recognize the value of such projects in terms of the positive impact on corporate image, employee satisfaction and hiring as well as long-term cost savings in terms of energy and other operational expenditures, Labelle explains.

Despite the lackluster quarter, some signs of stabilization emerged during the third quarter, Studley’s report says. The San Diego region recorded net positive absorption for the first time since the third quarter of 2007 as the Central Suburban class A sector posted net positive absorption of 320,121 square feet. Additionally, the North Cities class A sector registered net positive absorption of 193,076 square feet. However, trailing net absorption (the sum of net absorption over the last four quarters) was still negative, totaling -116,454, but was well below the one million square feet posted in the previous four quarters.

The overall vacancy rates declined for the first time since the opening quarter of 2007, falling from 16.9% to 16.4%. The class A vacancy rate remained basically unchanged, inching down from 20.5% to 20.4%.

The survey showed that rents continued to fall, with overall asking rents declining in the third quarter by 2.2% to $2.46 per square foot, per month, and class A rents dipping 1.7% to $2.82. Effective rents are dropping dramatically, with transactions being executed at 20% to 30% below asking prices.

The Studley report showed that, on a trailing four-quarter basis (the sum of all leasing activity over the last four quarters), overall leasing equaled 4.3 million square feet, down by 12.9% from last quarter and 41.2% below the historical average of 7.4 million square feet leased every four quarters. Class A trailing leasing activity equaled 2.4 million square feet as compared to last period’s four-quarter total of 2.6 million square feet leased. Historically, class A trailing leasing totaled 3.4 million square feet leased every four quarters for the overall San Diego market.

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