Industrial Market
With 14 million square feet of gross activity, San Diego’s industrial market experienced 5.6 million square feet of net absorption in 1999. More than 1.6 million square feet of positive net absorption were generated in the fourth quarter alone, primarily due to the high volume of new construction that was pre-leased.
The industrial vacancy rate in San Diego continued to decline,to 7.21% in the fourth quarter from 7.32% in the third quarter. The rise and fall in vacancy for the past few quarters can be attributed to fluctuation in the volume of newly constructed product entering the market.
Countywide average asking triple-net lease rates for industrial space rose 1% to 71 cents per square foot per month from the third quarter. Average triple-net lease rates ranged from 41 cents in Del Mar Heights to $1.36 in Torrey Pines/University Towne Centre.
Exhibiting a healthy reaction to the increasing amount of vacant space, construction activity continued to decline during the fourth quarter. Four of the 21 sub-markets,Carlsbad, Otay Mesa, Torrey Pines/University Towne Centre and Miramar,accounted for 75% of the 1,603,707 square feet under construction, a total that was down from 2 million square feet in the third quarter. The slowdown already has caused vacancy rates to decline.
Office Market
Strong demand for new office space (340,000 square feet of net absorption) pushed the fourth-quarter vacancy rate down to 8.19% from 8.70% in the third quarter. However, buoyed by 1 million square feet of new office space that flooded the market in the past year, the vacancy rate remained well above the 7.80% in the fourth quarter of 1998.
During the fourth quarter, the average asking full-service-gross lease rate for office space rose 3 cents (2%) to $1.62 per square foot per month, the highest level since 1991’s $1.67. The average office lease rate has increased 4.5% from $1.55 in the fourth quarter of 1998.
With 5.8 million square feet of leasing activity in 1999 (up 5% from last year), more than 1.1 million square feet of net absorption were experienced this year. Led by Downtown, U.T.C. and Sorrento Mesa, the market generated 341,261 square feet of positive net absorption in the fourth quarter, which was up nearly 100,000 square feet (41%) from the fourth quarter of 1998.
Office construction ramped up about a year ago. Since the beginning of 1999, approximately 2 million square feet of office space consistently have been under construction in San Diego. Approximately 2.1 million square feet were under construction during the fourth quarter, down slightly from the 2.2 million square feet under construction in the third quarter.
