Landlords Still Hold Favorable Cards
San Diego — As the early months of 2017 unfold, it’s clear that demand for San Diego County commercial real estate remains strong, even if most sectors aren’t exhibiting red-hot characteristics like those seen during the past two years, particularly in the multifamily and industrial segments.
Still, the numbers at the end of the first quarter showed that landlords remained the chief beneficiaries in the multifamily and retail categories, where the countywide vacancy rate hovers around 4 percent, as well as the industrial segment, where most local experts report a vacancy around 5 percent.
With regional vacancy around 10 percent, the office category is tilted more closely toward an equilibrium between landlords and tenants, except for high-demand markets like Del Mar Heights and Torrey Pines where demand far outstrips supply, with rents reflecting that.
Property sales and leasing remain generally strong in markets such as University Towne Center, Sorrento Mesa and Carlsbad. Downtown San Diego continues what has been a long recovery since the end of the Great Recession, fueled by a gradual influx of apartment dwellers and small businesses.
The region as a whole is still posting low unemployment, with continued job growth in sectors such as technology and life science. Other key local industries that fuel demand for real estate, such as tourism and defense, remain healthy by historical standards.
As always, conditions on the ground can vary widely depending on the submarket. But San Diego County during the past decade has not been significantly overbuilt in any of the major commercial categories, and is currently not showing signs of becoming so.
With the midpoint of 2017 approaching, the San Diego Business Journal asked local experts — including brokers, investors and developers in the four categories — to assess key emerging trends of the year’s first half, and discuss local and national factors that could impact the region in the second half and beyond. Excerpts of their written responses are on the links below.
Originally published by San Diego Business Journal