CoStar Market Insights: Tech Submarkets Continue to Lead the Way in San Diego
It was questionable if San Diego’s industrial sector could match the post-recession high for annual rent growth it set in the first quarter. And although it came up short, the industry had to settle for simply another stellar quarter.
Annual rent growth finished the second quarter at 6.4%, down from the record-pace of 7.2% posted after March, but doubled the long-term average for San Diego of 3.3%.
It marked the 30th straight quarter of positive rent growth in the industrial sector, a feat equaled in the office market.
However, quarterly growth in the industrial sector did pull back to 1%, the lowest figure in six years. Over that time, San Diego’s logistics, flex and specialized inventory averaged 1.5% quarterly rent growth.
No submarket in San Diego posted rent growth below 6% in the past 12 months. And nowhere was rent growth as pronounced as it was in submarkets heavily tilted toward the tech sector.
Sorrento Mesa led the county in annual growth, topping 7%. That came as Sorrento Mesa posted the lowest annual net absorption figure in San Diego during the same period, led by several Qualcomm reversals after laying off 1,500 workers last year.
Torrey Pines, Sorrento Valley and UTC all posted annual growth at or above 6.5%, while Sorrento Mesa and Torrey Pines were the only submarkets to exceed 7%.
San Diego’s landlords may still have some runway left for rent growth. CoStar does not anticipate that annual rent growth will fall below the long-term average until 2021, and rent growth is expected to remain positive through the forecast.
Article By; CoStar
JULY 09, 2019 | JOSHUA OHL
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