San Diego County’s unemployment rate in the fourth quarter was 3.9%, 0.2% lower than in third quarter of last year.
It’s estimated that San Diego added 21,900 non-farm jobs in 2006, according to Los Angeles County Economic Development Corp.
The county’s expected to add 19,500 jobs this year, according to the group.
Industrial Highlights
There was about 1.6 million square feet of industrial construction under way. Total construction was up 26.9% compared to a year ago.
Planned industrial construction in San Diego was up compared to last year. There was about 4.3 million square feet of industrial space planned versus last year’s 3.5 million.
The industrial vacancy rate checked in at 5.7%, lower than the 6.2% rate last year. The lack of industrial space was creating demand for it and put upward pressure on lease rates.
The average asking lease rate per month was 70 cents per square foot, triple net, in San Diego, a 1.4% increase from last year. Rental rates are expected to increase 5% to 7% this year as the economy continues to expand.
There was about 1.1 million square feet of positive net absorption during the fourth quarter, giving San Diego’s industrial market a total of 6.9 million square feet of positive absorption for the past three years.
Office Highlights
There was 4.6 million square feet of office construction under way, and total construction was higher than the 4 million square feet that was under construction at the same time last year. this was an increase of almost 15% when compared to last year.
Planned office construction in San Diego County was slightly up at 9.3 million square feet. Last year saw 9.2 million square feet of office buildings planned.
The office vacancy rate was at about 11.2%, up from 9.6% a year ago.
The average asking lease rate was $2.61 a square foot per month in the fourth quarter, 3.6% higher than in the fourth quarter of 2005.
Office absorption checked in at positive 32,503 square feet for the fourth quarter, giving San Diego a total of 870,507 square feet of positive absorption last year.
Rental rates are expected to continue to increase at moderate levels in the short run, and tenant concessions will lessen as the economy in San Diego continues to expand. These conditions will put upward pressure on lease rates. Rental rates are expected to grow 3% to 5% this year.
Research and Development
There was 291,444 square feet of research and development construction under way, down 63% from the fourth quarter in 2005. Still, there was more than 1 million square feet of new research and development space delivered last year.
Planned research and development construction in San Diego was up from last year. There’s currently more than 1.1 million square feet of research and development space planned, compared to last year’s figure of about 1 million square feet.
The research and development vacancy rate was 10.7%, down from the third quarter’s 10.8% and last year’s 11.3%.
The average asking lease rate per month was $1.54 per square foot in San Diego, up 12.4% from the fourth quarter. Rental rates are expected to increase 5% to 7% in 2007 as the economy continues to improve.
Research and development absorption checked in at 217,540 square feet of positive net absorption during the third quarter. San Diego’s research and development market saw a total of 957,166 square feet of positive absorption last year.
Retail Highlights
There was 731,445 square feet of retail construction under way. Total construction was lower than the 1.9 million square feet that was under construction a year ago.
Planned retail construction in San Diego County was down. There’s 1.3 million square feet of retail space planned versus last year’s nearly 4 million square feet.
The retail vacancy rate was low, at about 3%, up from the 2.7% rate in the fourth quarter of 2005.
The average asking lease rate was $2.13 a square foot per month in the fourth quarter. This was higher than last quarter and 18.3% higher than in the fourth quarter of 2005. This represented a new record high for retail lease rates in San Diego.
Retail absorption checked in at a positive number of 379,504 square feet for the fourth quarter, giving the San Diego retail market a total of more than 6 million square feet of positive absorption for the past 18 quarters.
Rental rates are expected to continue to increase at moderate levels in the short run, and concessions will lessen as the economy in San Diego County continues to expand. These conditions will put upward pressure on lease rates going forward. Rental rates are expected to grow 5% to 7% this year.
Data and analysis by Jerry Holdner, vice president of market research at Voit Commercial Brokerage LP.
