Demand for office space dips

[Beach Rat]

http://www.signonsandiego.com/news/business/20060726-9999-1b26office.html

This is an interesting article about demand lightening up for commercial rentals. I was wondering if anyone had plotted information on historical prices for commercial rentals in price per square foot over the last 10 years, maybe Bugs. This could be a gauge for a possible up coming recession. A sever drop in price due to lack of demand would lead me to believe that companies, jobs, are downsizing or leaving in general.

[powayseller]

I’ve noticed more vacancies in retail centers, some of them big spaces. The highest rent area in the area, according to one of the tenants, is the shopping mall by Trader Joe’s on Carmel Mountain Road, off I-15. This summer, two tenants moved out. The Cookies for Design, which had been there since I moved here in 1999, had a Sheriff Eviction Notice. The busiest intersection in Poway, on Poway Road and Community Road, has a sign for a 7,000 sq ft lease. Something is definitely going on.

Add to that so many stores are now advertising Help Wanted in their windows. Since when does a bank do that? Something is going on – people are leaving so jobs are harder to fill and sales are down so businesses are starting to shut down.

These are leading indicators, guys! By the time this makes it into the media as, “Retails Sales down in SD, businesses shutting down”, it will be another year.

[4plexowner]

I’ve worked in the same business park near UTC for 8 years now. Mostly engineering companies – Qualcom, SAIC, etc.

There are about 15 buildings in this area. All of them are 2 and 3 story office buildings which probably house 2-400 workers per building(?).

In eight years there has never been enough empty office space in this area to justify putting up ‘For Lease’ signs.

This year, three of the buildings are entirely empty. Two of them have large ‘For Lease’ signs in front.

[Bugs]

Commercial rental rates are a little tricky. In order for a retail unit to generate more rent, the business that occupies that unit has to generate more revenue.

Poway’s retail district along Poway Road has a lot of variation in age and appeal, and as a result has a sizable variation in rental rates. For the best properties (relatively recent construction, nice appeal) the rental rates have not quite doubled over the last 10 years. For the industrial properties to the south along Scripps Poway Parkway, the industrial rents haven’t even gone up by 50%. Each of these market segments marches to a different beat.

I think that the big retail mega centers like Trolley Square in Santee, Vista’s Townsite Center, and the ones in San Marcos are eventually going to run into a brick wall on rents and occupancy ratios because the retail business just isn’t going to increase enough to economically justify the renewals or exercise of options. Especially as retail spending related to houses decreases and as fewer people dine out 7 days a week.

One other thing to remember is that when a new retail center comes to town it often scavenges tenants from the older properties. This has happened big time in Santee, and Oceanside; and to lesser extents in San Marcos, Escondido and Poway.

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