Archive for November, 2011

San Diego’s Sunnier Real Estate Forecast

America’s Finest City and County enjoy a slightly better economy than most other places in the United States. San Diego’s economy remains fairly stable, having gained approximately 15,000-20,000 jobs in 2011. The population continues to grow by more than 30,000 people per year, adding about 10,000 new households annually. Thus, San Diego has a growing base of consumers and real estate occupants.

San Diego did not overbuild in the last ten years like some other western cities, and its stable apartment market boasts vacancy rates under 5.0%. Not until 2013-2014 will there be any significant number of new apartment units coming available, leading to disappearing concessions, increasing rents (probably in the range of 3-5% annually), and further compressed cap rates in 2012.

In the retail sector, San Diego also enjoys vacancy rates below 5.0%, as many national chains look to enter or expand in the San Diego market in 2012.

The industrial sector remains fairly strong.  The smaller modern spaces in urban settings continue to have low vacancy rates, with minimal new inventory coming on line, as some of those spaces gradually get converted to retail warehousing, office space, storefronts, and research and development facilities.

The office sector is slowly reviving as new small businesses are created and existing ones expand. Competition for “A” space has steadily increased, with many firms seeking to take advantage of the opportunity to move into better space at affordable rents.  Though already moving in the right direction, it will likely take at least 3 more years before the office market stabilizes.

In short, expect increasing sunshine for San Diego County’s commercial real estate markets in the coming years.

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