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Glimmer of Light

Has the economy begun to show signs of recovery? While it may be too early to tell, it appears there are some signs of life. Given that job growth is the main driver for the commercial real estate market, the near jobless economic recovery may indicate some time will pass before this sector stabilizes. Most analysts project commercial real estate will remain somewhat flat in 2010, increase slightly in 2011, and stabilize in 2012. However, below are several indicators illustrating there is a glimmer of light:

San Diego Vacancy Rates

During the past three months, vacancy rates have been stagnate for most submarkets including the I-15 Corridor, Mission Valley, and Kearny Mesa. While Carlsbad, Downtown, and UTC have slightly ticked up, Sorrento Mesa and Mission Valley have actually decreased.

Rental Rates and Concessions

Concessions provided by landlords to tenants seem to have tapered off. Some landlords are becoming more aggressive to lure new tenants, but for the most part free rent, rates, and other concessions remain constant over the past quarter indicating we may be near the bottom.

U.S. Unemployment

The U.S. Labor Department stated that 162,000 jobs were added in March and the unemployment rate held steady at 9.7% for three straight months. While this is not staggering news, it is positive news.

U.S. Office Rents

Average net rents nationwide in the office sector, the largest segment of commercial real estate, fell 0.8% in the January-to-March period compared with the prior quarter and were down 7.4% from the same period a year ago, according to Reis Inc., a New York research firm. “Wall Street Journal, April 5, 2010”

I know what all of you are thinking; so, are we really in a recovery? In my opinion, it is still too early to tell. One more quarter of data will make us all feel a little more at ease. The question then becomes, will we have a “U” shaped recovery or a “W” shaped recovery. If it’s the later, then we will all be in for another ride in the near term. But either way, tenants looking to renew, renegotiate, or relocate need not worry as there is plenty of time to reap the rewards of a tenant friendly real estate market.

Scot Ginsburg is an executive 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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