Following are some of the key findings:
- The San Diego office market, after having seen its last trough in the fourth quarter of 2012, should continue to see slow improvement, with vacancies falling to nearly 16% and effective rents growing by 1.3% in 2012 and by 2.1% in 2013.
- Although retail rents are somewhat stagnant, occupancy levels remain stable, and the retail market has seen a return to positive absorption levels; look for retail vacancy rates to end the year at 6.1%, while asking rents grow by 1.3% to 1.7% this year and next.
- In keeping with last year’s cautious optimism, 2012 seems to be the year in which the county’s industrial sector began its recovery; look for industrial vacancies to fall to 8.6% for all of 2012 and to 8.1% in 2013, while asking rent growth rebounds to 1.3% this year and more than doubles to 3% for 2013.
- Rather than investing in new supply, many building owners are building additions or making alterations to existing properties; permit activity for new development declined for both the retail and industrial sectors. In contrast, office properties in San Diego experienced strong growth in permit activity for new development.
- With interest rates for 10-year U.S. Treasury bonds recently trending down below 1.70%, current cap rates for commercial property sectors look competitive by comparison, ranging from just over 3% for retail properties to around 7% for the office sector.
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