By David Marino
For the second quarter in 2017, we continue to see a stable market whereby there is strong tenant demand in the pipeline that should result in continued decline of availability rates throughout the remainder of the year. Year to date, total supply has been effectively flat signaling neither an improving nor declining market. However, another 430,000 square feet of sublease space inventory came off the market this year which resulted in the lowest amount of sublease space on the market in over two years. As we have reported before, total sublease availability is the strongest indicator of the health of corporate tenants in San Diego.
As far as office space demand, the core markets of Kearny Mesa, Mission Valley and Downtown continue to outperform the suburban markets like Carlsbad, Sorrento Mesa and Del Mar Heights, all three of which have availability rates of over 20%. While a recent Union Tribune article suggested that office vacancy countywide is now under 10%, vacancy rates do not capture the total availability which includes space under construction as well as the overhang of sublease space. There is consistent overhyping by the brokerage community of the strength of the market whereby tenants looking to lease lab, office or industrial space consider all the space that is available and not just “vacant” space.
In summary, while the market continues to be strong, it is not overwhelmingly a landlord’s market.
David Marino is executive vice president of Hughes Marino, an award-winning commercial real estate company with offices in San Diego, Orange County, Los Angeles, San Francisco, Silicon Valley and Seattle. One of the top commercial brokers in all of Southern California, David possesses unrivaled, comprehensive market knowledge, and writes regularly about San Diego commercial real estate on his blog, Suburban Scoop. Contact David at 1-844-NO-CONFLICT or firstname.lastname@example.org to learn more.