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2013 Forecast: Leasing Rates

By Thor Kamban Biberman

While rents for office, industrial and retail properties are improving in some San Diego submarkets, they have a long way to go before returning to 2007 levels.

Scot Ginsburg, a Hughes Marino senior vice president, said he has seen Class A office rental rates climb by nearly 30 percent in Del Mar Heights during the past 18 months, and nearly 20 percent in the University Towne Centre submarket.

“The office rental rates that had been $2.50 to $2.60 (per-square-foot) are now $3.35 in Del Mar Heights, and rates that were $2.25 in UTC are now $2.65 to $2.75,” Ginsburg said.

The Irvine Co., which owns the 800,000-square-foot Plaza at La Jolla Village among many other properties here, led the way in pushing the Class A rents at UTC as Kilroy Realty, which owns more than 1 million square feet in Del Mar Heights, is setting the rents in that market.

In Sorrento Mesa, which, like Del Mar Heights and UTC, has fluctuated between too much and very little space over the years, the average rental rate has climbed from $2.35 to $3.00 in 18 months, Ginsburg said.

Ginsburg said that even in Carlsbad, which had been considered to be overbuilt for several years, office absorption has sufficiently improved for the rents to have climbed from $2.15 to about $2.50 during the past 18 months as well.

The average office rents in the fourth quarter 2012 ranged from $1.83 per-square-foot in the South Bay to $3.62 in what is referred to as the North Central County, according to The CoStar Group
As is the case in office properties, the rental rate ranges for industrial properties vary widely depending on location and the condition of the asset.

Countywide, the industrial rental rates ranged from an average of 56 cents in the South Bay to about $1.09 for flex space in the North County according to CoStar. Although the South Bay figure seems high, it does include Chula Vista and National City as well as Otay Mesa.

The average rate for pure industrial space countywide was 81 cents per-square-foot according to CoStar.

San Diego County’s retail market took a hit like other markets around the country, but it also has rebounded quicker than most of them.

By CoStar’s accounts, the average retail rents at year-end December ranged from about $1.40 in the East County to about 2.22-per-square-foot in the North County. However, some upscale centers have much higher levels.

Scot Ginsburg is a senior vice president of Hughes Marino, a global corporate real estate advisory firm that exclusively represents tenants and buyers. Contact Scot at 1-844-662-6635 or scot.ginsburg@hughesmarino.com to learn more.

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