Office developers continue to be bullish about San Diego, say researchers at JLL. Although there’s been a recent uptick of development, deliveries this cycle are still significantly below the last cycle.
JLL compared office development over the past 20 years and found the lack of available land has kept a lid on development of office product. Recent deliveries have kept pace with office absorption, with new supply and demand balanced over the past five years. Vacancy has stabilized at just below 11%, its lowest point since 2007.
The limited supply of large blocks of Class A space, strong recent tenant demand, and rising rents has advanced construction of 16 projects totaling 2.1 million square feet in San Diego. Researchers note, prior to COVID-19, investors had been confident in the market’s office fundamentals.
By comparison, from 2018 to 2020 the average annual square footage under construction total sat near the two-million-square-foot mark, which exceeded the 10-year average of 1.3 million square feet. But even with this surge in development, the current cycle 10-year average is 16% below the previous 10-year cycle of 1.6 million square feet.
But, with the current slowdown in demand and a large amount of product expected to deliver in 2020, vacancy is likely to rise in the coming quarters.
Dennis Kaiser is Vice President of Content and Public Relations for
Connect Commercial Real Estate. Dennis is a communications
leader with more than 30 years of experience.
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