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CommentsHow About an Office?
Though some homeowners believe they already live at their offices, the conventional wisdom prior to this year was that the commercial real estate market was somewhat insulated from the meltdown on the residential side. Now, analysts are coming to the conclusion that the commercial market has taken a hit, though minor compared to the carnage in residential.“The market is feeling the weakening impact of two factors: the overall slowdown in the economy and the residential market, which has commercial implications,” says Gary London of the London Group Realty Advisors.
London pegs the office vacancy rate at about 15 percent, highest since the Tech Wreck of 2001. “The biggest contributor to the vacancy rate is that we added a lot of office space over the last couple of years, about 3.5 million square feet, and it just came on at the wrong time, which spiked up office vacancies,” he explains. “It’s not at a real danger point, but it’s weaker than you want to see, and there are pockets of strength and weakness throughout the county.”
The countywide lease rate is about $2.60 per square foot, which is virtually unchanged over 2007. Expect to pay more — about $2.90 per square foot — in markets such as Carmel Valley or UTC, and less in the Highway 78 corridor, where office space runs about $2.14 per square foot.
London says the situation in San Diego beats sections of Orange County near John Wayne Airport, where some of the mortgage loan companies responsible for the residential meltdown have also left an office vacancy rate of about 30 percent.
Though London says the industry outlook is guardedly upbeat, a real sense of optimism will develop after the presidential election, “no matter who is elected.”
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