San Diego’s commercial office market generated mixed results in the third quarter, with the vacancy rate rising, according to a quarterly report from national commercial broker Cushman & Wakefield.
According to the report, the office vacancy rate increased to 15% in Q3 2023, up 1.1% from a year ago. This increase was the result of a decrease in occupancy and an increase in sublease space.
Despite the disappointing results, the report found a few positive signs for the market.
Leasing activity is expected to pick up in the coming months, led by tenants in the 10,000 to 50,000 square foot range.
More than, 1.3 million square feet of office space is under construction, with 47% of that space already leased, according to the report.
Looking ahead, the commercial market is expected to remain tenant-favorable, with landlords offering concessions to land tenants.
But investors continue to be hesitant to acquire office buildings in San Diego.
Total investment volume in 2023 through the quarter was $553 million, a fifth of the market through the first three quarters of 2022, according to the report.
However, the report found one interesting trend that might help relieve the ongoing housing shortage.
“Despite the limited sale activity, investors are showing interest in repurposing and redeveloping obsolete Class C office buildings,” the report said. “These older buildings, particularly those built in the year 2000 or earlier, offer opportunities for investors to purchase them at land value and transform them into multifamily developments.”
The life sciences sector continues to be strongly affected by the current economic downturn and lack of venture capital with Illumina, Thermo Fisher Scientific and Surgalign all announcing layoffs during the quarter.
Additionally, US Bank announced layoffs as part of its merger with Union Bank and L3 Technologies announced the closure of a Carlsbad location.
Future absorption of office space will come from leases signed by tenants in previous quarters that have yet to be occupied, the release said.
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San Diego home prices jumped 7.1% in September compared to the same month last year, according to the latest First American Data & Analytics Home Price Index. First American is a Santa Ana-based real estate data provider.
This is the sixth consecutive month that home prices have reached a new peak in San Diego, the company said.
Nationally, according to the Index, home prices increased 6.3% year-over-year in September 2023. However, the pace of home price growth is starting to slow due to rising mortgage rates and limited supply.
Despite the slowdown, the housing market here remains competitive, with buyers chasing what few homes are available for sale.
Among the 30 core-based statistical areas tracked by First American, the five markets with the greatest year-over-year increase in the HPI were Miami at 8.8%, St. Louis at 8.2%, Anaheim at 7.4%, San Diego at 7% and Baltimore at 7.%.
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San Diego’s Axos Bank was named “Best for Mobile Banking” in America by GOBankingRates.com, for the sixth time since 2015.
The bank’s online services were evaluated across a wide range of factors, including customer service, products offered, and mobile app ratings.
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Carlsbad-based e-commerce fulfillment and logistics provider ShipCalm has partnered with two North County businesses to ensure donations went to Maui residents recovering from the summer wildfire.
ShipCalm has covered the $5,000 in shipping costs to send the coolers and donations to Maui, and worked with its partner, Approved Forwarding, to load pallets and ensure shipping was done properly.
ShipCalm CEO Greg Moser said that his company’s expertise in shipping allowed it to quickly navigate the time-sensitive nature of disaster relief.
The company wanted to remove obstacles by streamlining the process of forwarding the much-needed items directly to Lahaina residents.
The move comes after a donation drive at Carlsbad Brewing Co., where residents donated items such as clothing, backpacks and toys.
“People in our community rallied and wanted to donate new items for families in Lahaina,” said Ally Lopez, a Maui native who co-led the effort and owns Oceanside branding firm Band of Martians. “This was a wonderful example of North County businesses coming together to support Lahaina.”
Lopez, who originally set up an online campaign to raise funds for shipping costs, was connected to ShipCalm after searching for the most efficient and affordable way to send the donations to Maui.
“The shipping costs to Hawaii are astronomical, so it’s pretty incredible that companies like ShipCalm supported our efforts,” she said in a prepared statement.
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The landmark 757-roon Hotel del Coronado, now owned by Blackstone Real Estate and operated by the Hilton hotel empire, says it will spend $160 million to restore and revitalize the historic Victorian core of the complex.
According to a news release, the redo will encompass both guestrooms and event spaces, with a completion date set for Spring 2025.
The original finishes will remain intact, the release said, but contemporary enhancements will be added to bathrooms and furnishings, with state-of-the-art technologies to be installed.
The original Victorian structure, built in 1888, has 487 rooms.
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General Dynamics NASSCO shipyard has been awarded a $754 million contract by the Navy to modernize and repair two guided-missile destroyers, the USS Chung-Hoon (DDG 93) and USS James E. Williams (DDG 95).
The contract for an initial $15.6 million includes options that, if exercised, would bring the cumulative value to $753.8 million, according to a news release.
Some of the work will be performed in Virginia as well as San Diego, and the project is expected to continue through November 2030, if all options in the contract are exercised.
The NASSCO’s facility here specializes in the design and construction of ships for the U.S. Navy and commercial markets, as well as repair services for the Navy.
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San Diego County, which boasts the most craft breweries in the U.S. at 150 plus, celebrates its annual Beer Week Nov. 3-12.
The series of events, which take place at local bars and restaurants, is sponsored by the local Brewers Guild. The guild, founded in 1997, celebrated its 26th anniversary this summer.
Individual breweries will host events and have beer specials throughout Beer Week, all of which are posted on the Brewers Guild’s calendar.
San Diego’s craft beer industry has a significant financial influence on the region, generating $1.2 billion in economic impact. It’s also known for its medal-winning beer styles and positive international reputation.
San Diego’s oldest brewery is the San Diego Brewing Co., which opened in 1896. The oldest brewery still in business in San Diego County is Karl Strauss, which was founded in 1989.
Tom York is a Carlsbad-based independent journalist who specializes in writing about business and the economy. If you have news tips you’d like to share, send them to tom.york@gmail.com.
