This market perspective was contributed by Michael Mazzotta.
I’m a commercial real estate broker and represent tenants in the San Diego Commercial Real Estate Market including Carlsbad, Chula Vista, College Area, Coronado, Del Mar Hts/Carmel Valley, Downtown, East County, Escondido, Governor Park, Kearny Mesa, La Jolla, MCAS Miramar, Mira Mesa/Miramar, Mission Gorge, Mission Valley, National City, North Beach Cities, North Central County, Oceanside, Old Town/S Arena/Pt Loma, Otay Mesa, Outlying SD County N, Outlying SD County S, Park East, PB/Rose Canyon/Morena, Poway, Rancho Bernardo, San Marcos, San Ysidro/Imperial Beach, Scripps Ranch, Sorrento Mesa, Sorrento Valley, Southeast San Diego, Torrey Pines, Uptown East, Uptown West/Park West, UTC, Vista submarkets.
Recent Leasing Trends
The San Diego market has been a very dynamic tenant and landlord market as of late. Rental rates have climbed back to where they were pre-recession inn 2006, 2007, 2008. Office markets such as La Jolla UTC, Sorrento Mesa, Sorrento Valley, and Rancho Bernardo have stabilized the most and are now fairly balanced markets putting landlords and tenants on equal footing.
What’s driving the market?
The leasing market in San Diego has improved greatly in the past 18 months. We are seeing more and more companies expanding their offices, and we have seen a great number of companies leasing multiple locations.
Two big things are driving growth: First is the general rebound of the overall local economy. Companies are beginning to invest again and grow headcount. We are seeing many more expansions and less “blend and extend” type deals. This is especially true in the technology sector. Technology start-ups have always fueled the excitement and demand of the San Diego markets and we will continue to see this trend continue. More and more start ups are attracted to San Diego due to it’s abundance of work/live environments throughout all of the submarkets.
Tenant advice and strategies
For San Diego County tenants that are looking to find space, I would suggest narrowing your search to buildings with 10,000 square feet or more. I would also focus on buildings that have historical vacancy to capture the best deal. These buildings also provide the ability to expand quickly without having to break a lease and relocate. Never forget to include in your lease a first right of refusal. And always put early occupancy and free rent inside the lease with landlords that want to see a higher contract rent. Securing the right lease and space goes far beyond just getting the lowest starting rent.