Central San Diego Office Vacancy Factor Declines

Downtown San Diego--currently with a vacancy rate of 24% for more than 60 buildings--experienced its lowest office space absorption since 1981, with only 13,000 net square feet of space absorbed during the first quarter of 1985, according to a survey by Grubb & Ellis Commercial Brokerage Services.

The downtown vacancy rate is about the same as the countywide rate, according to Tony Albin, sales manager in the Grubb & Ellis office. He added that the situation should remain the same through the end of the year, since there is slightly more than 3.1 million square feet of office space under construction in the county.

Referring to the poor showing of downtown San Diego, Bill John of Grubb & Ellis said that this is an unusual quarter “and not a forerunner of things to come. In the near future, we see this area returning to its usual leadership position in terms of absorption.”

But he added that with more than 400,000 square feet of space under construction downtown, even a “normal” absorption rate will result in a year-end vacancy factor in the 24% range.

Kearny Mesa also had an unusually poor first quarter, absorbing only 13,000 square feet, but Pat Rohan of Grubb & Ellis sees this as an aberration, with absorption of as much as 250,000 square feet expected in the next quarter alone.

The University Towne Centre area just east of La Jolla led in absorption for the first quarter, with more than 90,000 square feet of office space absorbed, according to Chris Hobson of Grubb & Ellis. Despite this leasing pace, the vacancy rate in the area was 35% at the end of the quarter, due to new buildings that added to the available space.

Mission Valley continues to be the best performing marketplace in terms of low vacancy--a 16% rate at the end of the quarter--and in terms of absorption. The 84,000 square feet absorbed in the first quarter is only slightly behind University Towne Centre, according to Vince Botticelli of the realty firm.

Albin said that the countywide absorption rate, “or measure of tenant demand, continues at a healthy level. Once again we are faced with high vacancies and a tenants’ market. The amount of new construction is responsible for the higher vacancies, not lack of tenant demand.”