San Diego Commercial Real Estate 2011 – Good, Bad, or Ugly…Does anyone know where we are going?
November
1, 2011
For San Diego commercial real estate, 2011 has been a little of each, Good, Bad, and Ugly. Generally speaking what’s good for the lessee is not always good for the property owners and vice versa. This article will discuss what has been good and what has been bad in this ever changing San Diego commercial real estate market we live in.
The Good
The good news for the Lessee in 2011 has been the availability of commercial rental space in the San Diego Commercial real estate market and the decline in rental rates. If you will recall, back in mid to early 2008, occupancy levels in commercial lease space had gotten so high (less than 1% vacancy) pretty much across the board, that there were waiting lines for commercial space. With the high occupancy levels came some of the highest rental rates we have ever seen. When space would come available, generally there were two or three companies negotiating to lease it. The length of time a space would sit idle without generating income was almost non-existent; turnaround times were lighting fast.
Today that has changed quite a bit. In today’s world lessee’s have a wide range of spaces to choose from in almost any market. Rental rates in most markets are down from their 2008 highs by 20% to 40% depending on the rental market; concessions, tenant improvement allowances, and free rent have all gotten pretty generous.
The good news for the Property Owners in 2011: is there any? It depends on how you look at it and when and where you purchased your property. If you purchased the wrong San Diego commercial real estate at the wrong time you probably don’t see anything good about this San Diego commercial real estate market. However, if you have owned your real estate for a long time and carry low or no debt or recently purchased your commercial property at market adjusted prices, you are probably generally happy with the San Diego commercial real estate market.
In 2011 commercial property owners saw rental rates firm up; rates are not free falling any more (that’s good) and occupancy levels in the San Diego commercial real estate market have stabilized; in 2010 leases were not being renewed and vacancy levels rose fairly quickly. However, in 2011 renewals of commercial leases are taking place once again and occupancy levels have stabilized (that’s good). The competition is still high in the San Diego commercial real estate market, but generally things have firmed up for property owners in 2011.
The Bad
The bad news is not specific to commercial tenants or commercial property owners, the bad news is the economy and that impacts everyone. Granted some businesses and some property owners flourish in bad or less than good times, that has always been the case and probably always will be. Generally speaking, San Diego commercial real estate will hold its own from now until November 2012, beyond that it’s anyone’s guess.
For more timely information on the commercial real estate market in San Diego, call us at 619-469-3600.
By: Robert Phillips,
President/CEO
For San Diego commercial real estate, 2011 has been a little of each, Good, Bad, and Ugly. Generally speaking what’s good for the lessee is not always good for the property owners and vice versa. This article will discuss what has been good and what has been bad in this ever changing San Diego commercial real estate market we live in.
The Good
The good news for the Lessee in 2011 has been the availability of commercial rental space in the San Diego Commercial real estate market and the decline in rental rates. If you will recall, back in mid to early 2008, occupancy levels in commercial lease space had gotten so high (less than 1% vacancy) pretty much across the board, that there were waiting lines for commercial space. With the high occupancy levels came some of the highest rental rates we have ever seen. When space would come available, generally there were two or three companies negotiating to lease it. The length of time a space would sit idle without generating income was almost non-existent; turnaround times were lighting fast.
Today that has changed quite a bit. In today’s world lessee’s have a wide range of spaces to choose from in almost any market. Rental rates in most markets are down from their 2008 highs by 20% to 40% depending on the rental market; concessions, tenant improvement allowances, and free rent have all gotten pretty generous.
The good news for the Property Owners in 2011: is there any? It depends on how you look at it and when and where you purchased your property. If you purchased the wrong San Diego commercial real estate at the wrong time you probably don’t see anything good about this San Diego commercial real estate market. However, if you have owned your real estate for a long time and carry low or no debt or recently purchased your commercial property at market adjusted prices, you are probably generally happy with the San Diego commercial real estate market.
In 2011 commercial property owners saw rental rates firm up; rates are not free falling any more (that’s good) and occupancy levels in the San Diego commercial real estate market have stabilized; in 2010 leases were not being renewed and vacancy levels rose fairly quickly. However, in 2011 renewals of commercial leases are taking place once again and occupancy levels have stabilized (that’s good). The competition is still high in the San Diego commercial real estate market, but generally things have firmed up for property owners in 2011.
The Bad
The bad news is not specific to commercial tenants or commercial property owners, the bad news is the economy and that impacts everyone. Granted some businesses and some property owners flourish in bad or less than good times, that has always been the case and probably always will be. Generally speaking, San Diego commercial real estate will hold its own from now until November 2012, beyond that it’s anyone’s guess.
For more timely information on the commercial real estate market in San Diego, call us at 619-469-3600.
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