Office Market Report - NAI San Diego · 11085 Torreyana Rd Torrey Pines 22,550 Q1 19 Bioatla LLC Cresa - San Diego CBRE. San Diego Office. San Diego Office. San Diego Office. 3 -

Q3’19 San DiegoOffice Market Report

OverviewSan Diego Office

901 K 229 K 10.0% 3.5%12 Mo Deliveries in SF 12 Mo Net Absorption in SF Vacancy Rate 12 Mo Rent Growth

San Diego is coming off another strong quarter. Netabsorption outpaced deliveries during 19Q2 for thesecond straight quarter. That has helped the marketmaintain high occupancies, a low availability rate, andsturdy fundamentals. In fact, the vacancy rate matched apost recession low at the end of 19Q2. Carlsbad led SanDiego over the past 12 months with the highest netabsorption tally, supported by the completion of ViaSat'scampus expansion during May. At the same time, trailing12-month rent growth was above the long-termaverage.

The submarkets encompassing the UC San Diego areamong the county's core tech and life science hubs. Thatis where Apple committed to 100,000 SF for its entranceinto the market. It will bring 1,200 jobs to San Diego overthe next three years, with its move in at Eastgate Terracescheduled for later this year. Downtown, whereapartment developers are busy building high-rise towersin the East Village, led the market in negative absorptionover the past 12 months. Several properties have gone

under renovation, including the former Thomas JeffersonSchool of Law.

But the city council approved Stockdale's redevelopmentof Horton Plaza in May, which may help position thesubmarket to compete directly for tech tenants that stillgravitate to suburban submarkets near the UC SanDiego area. The Campus at Horton would be SanDiego's largest office spec development in years.Development, otherwise, has been relatively mutedacross the county over the past several years, withconstruction most often geared toward build-to-suits fortech firms or medical users.

Although the year started off on a cool note, posting thelowest sales volume in seven quarters, American AssetsTrust made a splash during 19Q2. It purchased La JollaCommons for more than $500 million. It was the biggestoffice deal in the past 20 years in San Diego as marketpricing reached an all-time high at the midway point of2019.

KEY INDICATORS

Market RentVacancy RateRBACurrent Quarter Availability RateNet Absorption

SFDeliveries SF

UnderConstruction

$3.3612.1%36,974,7734 & 5 Star 14.6% (107,479) 0 773,674

$2.6210.9%47,705,3513 Star 13.4% (131,650) 0 242,822

$2.286.3%32,437,7551 & 2 Star 8.9% 7,272 0 0

$2.7610.0%117,117,879Market 12.5% (231,857) 0 1,016,496

ForecastAverage

HistoricalAverage

12 MonthAnnual Trends Peak When Trough When

10.1%10.7%0.3%Vacancy Change (YOY) 14.9% 2010 Q1 5.6% 2000 Q2

669,1101,204,404229 KNet Absorption SF 4,862,579 2000 Q2 (1,156,273) 2008 Q4

1,122,7111,655,630901 KDeliveries SF 3,978,140 2000 Q2 251,581 2017 Q2

2.0%2.6%3.5%Rent Growth 17.0% 2001 Q1 -11.1% 2009 Q3

N/A$1.7 B$2.4 BSales Volume $4.4 B 2007 Q3 $267.0 M 2009 Q3

10/1/2019Copyrighted report licensed to NAI San Diego - 848763.

LeasingSan Diego Office

A strong employment base, buoyed by tech, lifesciences, and healthcare, provides a backbone ofstability in San Diego. Several top universities, includingUC San Diego, the University of San Diego, and SanDiego State University, provide a talent pool of job-seeking graduates.

Aided in part by strong demand and a relative lack ofspeculative construction, vacancies matched a post-recession low at the end of 19Q2. The percentage ofavailable space on the market also sat near a post-recession low this summer. Although move-outs onaccount of several renovations did impact trailing 12-month net absorption, particularly in Downtown during18Q4, it was mitigated by ViaSat's 350,000-SFexpansion in Carlsbad, which wrapped up in May. ViaSatadded another 50,000 SF in 19Q3. San Diego has nowrecorded positive absorption during the past fivequarters.

Apple committed to take 100,000 SF in UTC at the tailend of 2018 in one of San Diego's last remaining specprojects, Eastgate Terrace. It is part of the tech giant'sstrategy of building an engineering hub in San Diego byhiring 1,200 workers by the end of 2021. It is of littlesurprise that it is branching out into Qualcomm'sbackyard, where it can take advantage of the deep wellof talent in the chip-making industry, which also includesIntel.

The UC San Diego area is the life science and biotechhub of the market. UTC is where TakedaPharmaceuticals moved into its 160,000-SF build-to-suit at the beginning of 2019, relocating from the TorreyPines Science Center. UTC also includes amenities thatfew submarkets can match: Westfield UTC, a trolleyextension in 2021, freeway access, and countlessrestaurants and hotels. That Blue Line Trolley extensionwill link Downtown and Mission Valley with UTC andmake an additional 4 million SF of office space walkable

to transit riders.

Qualcomm moved out of more space in 19Q2 inSorrento Mesa. That comes as it shed 1,500 jobs in2018. Qualcomm left 77,000 SF at Mira Oberlin Plaza in19Q1 and another 75,000 SF at Sorrento Highlands atthe end of 19Q2. Those reversals pushed 12-month netabsorption into the red in Sorrento Mesa for the first timein a year. But that Sorrento Highlands space alreadyfound a tenant before the end of 19Q2. Omniome signed19Q2's second largest lease in San Diego and isexpanding from a 10,000-SF space in Sorrento Valley(Retrophin signed the largest office lease in 19Q2,almost 80,000 SF in Del Mar Heights/Carmel Valley thatAcadia Pharmaceuticals is leaving for One Paseo). Thattypifies the submarket that continues to diversify itstenants base. Dexcom and Curology are two other firmsthat expanded in Sorrento Mesa earlier this year, into90,000 SF and 54,000 SF, respectively.

Downtown, on the other hand, is one of the primarydrivers of negative absorption since 2018. Landlords areincreasingly shuffling their tenant rosters toaccommodate renovations. These renovations havelargely taken the place of speculative development in thesubmarket. Buildings, including the $55 million makeoverof Tower 180, Kettner & Ash, and the former ThomasJefferson School of Law, all offer tenants an opportunityto take down new space in the Downtown area. But sofar, they have not attracted the tech tenants that wouldalso support demand for Downtown's new apartmentdevelopment.

Kearny Mesa's big renovation project, Aero CorporateCenter, landed San Diego's biggest office deal so far thisyear. The property will not be ready until 2020, but theU.S. Veterans Administration signed on for 20 yearsduring 19Q1 for the entire 140,000-SF facility to operatean outpatient client. The lease was valued at $148million.



NET ABSORPTION, NET DELIVERIES & VACANCY

VACANCY RATE



AVAILABILITY RATE



12 MONTH NET ABSORPTION SF IN SELECTED BUILDINGS

3rd QtrBuilding Name/Address Submarket Bldg SF Vacant SF

1st Qtr 2nd Qtr 4th Qtr 12 Month

Net Absorption SF

UTC 163,648 0 163,648 0 0 0 163,648Bldg 1

Scripps Ranch 158,995 0 0 0 158,995 0 158,995The Watermark

Rancho Bernardo 154,157 0 0 0 0 0 151,889Kilroy Sabre Springs

Sorrento Mesa 159,600 0 0 0 0 0 114,473The Park

Scripps Ranch 155,000 49,675 23,258 0 26,920 0 104,725Scripps Northridge Corp

Carlsbad 100,000 0 0 100,000 0 0 100,000Building A

Carlsbad 90,000 0 0 0 0 0 89,021Building D

Carlsbad 90,000 0 0 0 0 0 89,021Building C

Sorrento Mesa 139,246 19,978 88,918 0 (10,400) 0 83,411Sorrento Towers

Carlsbad 77,000 0 0 77,000 0 0 77,000Building B

Escondido 75,000 0 0 25,000 0 0 74,456Palomar Health Outpatient Center

Rancho Bernardo 84,277 0 67,792 0 0 0 67,792Discovery Corporate Center

Mission Valley 182,000 108,309 (6,000) 69,507 0 0 67,645AMP&RSAND

Kearny Mesa 205,725 0 0 65,726 0 0 65,726Terraces at Copley Point

Sorrento Mesa 123,879 43,052 59,259 0 0 0 59,259Seaview Corporate Center

Sorrento Mesa 67,832 0 0 0 0 0 53,642Pacific Tech Center

Del Mar Hts/Carmel… 72,151 0 0 25,534 33,681 0 53,417Pacific Plaza at Torrey Hills

2,098,510 221,014 396,875 362,767 209,196 0 1,574,120Subtotal Primary Competitors

115,019,369 11,490,885 (229,448) (145,865) (343,459) (231,857) (1,345,044)Remaining San Diego Market

117,117,879 11,711,899 167,427 216,902 (134,263) (231,857) 229,076Total San Diego Market



TOP OFFICE LEASES PAST 12 MONTHS

Building Name/Address Submarket Leased SF Tenant Name Tenant Rep Company Leasing Rep CompanyQtr

Manchester Pacific Gateway Downtown 350,999 The United States Navy - -Q4 18

VA Outpatient Clinic Kearny Mesa 140,100 VA Outpatient Clinic - Voit Real Estate ServicesQ1 19

Procopio Tower * Downtown 126,000 Procopio CBRE CBREQ2 19

Eastgate Terrace UTC 96,543 Apple - The Irvine CompanyQ4 18

Kilroy Centre Del Mar Del Mar Hts/Carmel Valley 77,242 Retrophin - CBREQ2 19

Terraces at Copley Point * Kearny Mesa 75,970 Guild Mortgage Company - Cushman & WakefieldQ4 18

Sorrento Highlands Sorrento Mesa 74,558 Omniome Cushman & Wakefield CBREQ2 19

9360 Towne Centre Dr UTC 71,390 Samumed - JLLQ4 18

Discovery Corporate Center Rancho Bernardo 67,792 Daylight Solutions, Inc. The Garibaldi Group JLLQ4 18

One Paseo Del Mar Hts/Carmel Valley 67,706 ACADIA Pharmaceuticals,… Savills Cushman & WakefieldQ4 18

Terraces at Copley Point Kearny Mesa 65,726 Guild Mortgage Company - Cushman & WakefieldQ4 18

Eastlake Business Park * Chula Vista 59,322 Customs and Border Prot… - -Q2 19

Ocean View Corporate Center * Otay Mesa 50,673 Zebra Technologies Corp… JLL IDS Real Estate GroupQ4 18

Nexus Center UTC II UTC 49,130 Poseida - JLLQ4 18

La Jolla Commons UTC 48,785 - - CBREQ3 19

Campbell Place Carlsbad 47,500 Advanced Diabetes Supply - CBREQ2 19

Campbell Place Carlsbad 47,500 ViaSat, Inc. - CBREQ3 19

Seaview Corporate Center Sorrento Mesa 43,052 - - Cushman & WakefieldQ3 19

Del Mar Corporate Centre Del Mar Hts/Carmel Valley 39,308 - - CBREQ2 19

Kettner & Ash Downtown 38,069 Spaces CBRE Cushman & WakefieldQ4 18

Via del Campo Court * Rancho Bernardo 37,647 Northrop Grumman Corpo… - JLLQ4 18

AMP&RSAND Mission Valley 34,000 Qdoba Hughes Marino CBREQ4 18

ARE Torrey Ridge * Torrey Pines 33,864 Turning Point Therapeutics CBRE Cushman & WakefieldQ2 19

One Paseo Del Mar Hts/Carmel Valley 33,315 JPMorgan Chase - Cushman & WakefieldQ2 19

Atlas Carlsbad 30,734 - JLL Cushman & WakefieldQ4 18

One Paseo Del Mar Hts/Carmel Valley 30,283 Deloitte - Cushman & WakefieldQ1 19

Carlsbad Research Center Carlsbad 29,313 - - Cushman & WakefieldQ2 19

Westfield University Town Center UTC 29,000 Industrious - -Q2 19

1 Columbia Place Downtown 28,382 Industrious - JLLQ2 19

Sorrento Highlands Sorrento Mesa 27,551 - - CBREQ2 19

Scripps Northridge Corp Scripps Ranch 26,920 TrellisWare Technologies Cresa - San Diego;K… Colliers International;JLLQ1 19

Centrewest Sorrento Mesa 25,669 - - Cushman & WakefieldQ3 19

Pacific Plaza at Torrey Hills Del Mar Hts/Carmel Valley 25,332 Tandem Diabetes Care, Inc. - Newmark Knight FrankQ1 19

Balboa Executive Center Kearny Mesa 25,234 Coumbia Care - CBREQ1 19

Enclave Sorrento Sorrento Mesa 24,657 - - JLLQ2 19

La Jolla Reserve UTC 23,378 - - The Irvine CompanyQ1 19

One Paseo Del Mar Hts/Carmel Valley 22,870 - - Cushman & WakefieldQ3 19

One Paseo Del Mar Hts/Carmel Valley 22,624 Compass Savills Cushman & WakefieldQ4 18

11085 Torreyana Rd Torrey Pines 22,550 Bioatla LLC Cresa - San Diego CBREQ1 19

Pacific Center Mission Valley 22,505 - - CBREQ1 19

*Renewal


RentSan Diego Office

Low vacancies and limited spec construction have addedfuel to San Diego's rent growth, with 12-month growthstill above the long-term average this summer. Thisquarter, rent growth sits at -0.1%. This compares to1.1% last quarter and 1.2% at this time last year. SanDiego has not posted a rent loss for 30 straight quartersas of the end of 19Q2 (matching the streak in theindustrial sector).

Del Mar Heights/Carmel Valley crawled back to postpositive annual rent growth after 19Q2, after being thelone submarket to post a loss after 19Q1. Annual growthis most pronounced among the tech-heavy submarkets.

UTC, Sorrento Mesa, Torrey Pines, and Scripps Ranchare all at the top of the leaderboard in San Diego. Annualrent growth is not expected to pull back below thehistorical average until the end of 2020.

UTC's life science office properties help the submarketachieve some of the market's top rates. When PoseidaTherapeutics signed on for 50,000 SF at the UTCCampus @ Towne Centre, it committed for more than 10years starting at $3.90/SF NNN. Samumed's 70,000-SFsublease at the same campus starts at $4.15/SF NNN.Both leases commenced in 2019.

MARKET RENT GROWTH (YOY)



MARKET RENT PER SQUARE FOOT

4 & 5 STAR EXPENSES PER SF (ANNUAL)

Utilities Cleaning InsuranceMarket / Cluster Taxes Other Total

San Diego $1.19 $0.92$0.77 $3.85 $4.28 $11.01

Central San Diego $1.25 $0.83$0.38 $3.08 $4.12 $9.66

Downtown $1.65 $0.74$1.16 $3.79 $6.82 $14.16

I-15 Corridor $1.08 $0.88$0.44 $3.52 $3.56 $9.48

I-5 Corridor $1.26 $0.77$0.69 $4.24 $3.82 $10.78

North Central County $1.10 $0.93$0.49 $3.80 $3.70 $10.02

North San Diego $0.97 $1.17$1.16 $4.34 $4.27 $11.91

South Bay $1.23 $0.98$0.37 $3.19 $4.23 $10.00

SR-78 Corridor $1.10 $0.93$0.49 $2.22 $3.70 $8.44

Expenses are estimated using NCREIF, Trepp, IREM, and CoStar data using the narrowest possible geographical definition from Zip Code to region.



3 STAR EXPENSES PER SF (ANNUAL)


San Diego $1.08 $0.51$0.55 $3.05 $2.89 $8.08


Coronado $1.10 $0.47$0.33 $3.73 $3.31 $8.94

Downtown $1.40 $0.64$1.00 $2.65 $4.90 $10.59

I-15 Corridor $1.03 $0.43$0.44 $2.73 $2.13 $6.76

I-5 Corridor $1.33 $0.47$0.84 $3.58 $2.65 $8.87


North San Diego $0.92 $0.68$0.58 $3.85 $3.19 $9.22

Outlying SD County N $1.02 $0.40$0.45 $1.74 $2.22 $5.83

Outlying SD County S $0.91 $0.39$0.27 $1.21 $2.74 $5.52

South Bay $1.07 $0.45$0.32 $2.64 $3.20 $7.68

SR-78 Corridor $1.00 $0.40$0.45 $2.75 $1.89 $6.49


1 & 2 STAR EXPENSES PER SF (ANNUAL)


San Diego $0.70 $0.33$0.38 $2.87 $2.96 $7.24


Coronado $0.37 $0.45$0.31 $4.31 $3.97 $9.41

Downtown $1.24 $0.19$0.59 $3.57 $4.24 $9.83

I-15 Corridor $0.65 $0.23$0.33 $2.48 $2.69 $6.38

I-5 Corridor $0.79 $0.29$0.34 $3.77 $3.72 $8.91

MCAS Miramar $0.36 $0.45$0.31 $2.16 $1.72 $5.00


North San Diego $0.88 $0.32$0.50 $3.58 $3.45 $8.73

Outlying SD County N $0.63 $0.24$0.34 $2.19 $2.77 $6.17

Outlying SD County S $0.35 $0.43$0.30 $2.81 $2.92 $6.81

South Bay $0.37 $0.44$0.31 $2.61 $2.56 $6.29

SR-78 Corridor $0.62 $0.24$0.33 $2.60 $2.58 $6.37



ConstructionSan Diego Office

Build-to-suits for tech firms account for most of therecent supply in San Diego. Just this year, TakedaPharmaceuticals moved into a 160,000-SF build-to-suitin UTC during 19Q1; ViaSat moved into the second halfof its 350,000-SF expansion in Carlsbad in May; andMedImpact's 160,000-SF addition in Scripps Ranchdelivered this summer. Building is also underway at theNavy's 372,000-SF build-to-suit at Machester PacificGateway in Downtown. In fact, speculative constructionaccounts for so little new development, that less than100,000 SF was available in buildings under constructionthis summer.

Compared to last cycle, construction is downconsiderably. The years leading into recession averagedmore than 2.5% inventory growth per year. So far thiscycle, inventory has yet to either grow at least 1% orsurpass 1 million SF of net new supply in any year. Nextyear may the be first to pass that mark if the Navy towerat Manchester Pacific Gateway delivers on schedule.Inventory has only increased 5% since the recession.The lack of construction, compared to past cycles, couldadd some pressure to the market, providing fewer areasfor growth for companies already here or looking toexpand into San Diego. However, renovations arebeginning to fill that gap. Available space in buildings

that have undergone a renovation since 2018 exceeds1.5 million SF.

Kilroy is underway on the largest spec project in severalyears in San Diego. They are developing the mixed-useOne Paseo in Carmel Valley at a cost of more than $600million. Although it is scaled down from its original vision(on account of heavy local opposition), it will still include300,000 SF of office space, more than 600 apartments,and 95,000 SF of retail. The apartment and retailportions were well underway before the office workstarted at the beginning of 2019. About 45% of the officespace was pre-leased prior to breaking ground, led byAcadia Pharmaceuticals' nearly 70,000-SF commitmentfor its new corporate headquarters, a largely lateral movewithin the submarket. Other commitments includeJPMorgan Chase and Deloitte.

Stockdale received approval from the city council for theredevelopment of Horton Plaza in May 2019. Stockdateacquired the former mall last August for $175 million.The $250 million project will be repositiioned into a techcampus that could bring in 4,000 jobs to the DowntownSubmarket. That project could go a long way to helpincrease demand for Downtown's apartmentcommunities.

DELIVERIES & DEMOLITIONS


ConstructionSan Diego Office

SUBMARKET CONSTRUCTION

Average Building Size

RankUnder Constr

Under Construction Inventory

All ExistingSF (000) Pre-Leased SF (000)SubmarketNo. RankBldgs Pre-Leased %

1 Downtown 1 372 372,000100% 1 57,302372 1

2 Del Mar Hts/Carmel Valley 2 288 144,24276.2% 7 59,856220 2

3 North Beach Cities 3 94 31,45484.4% 6 10,04180 6

4 Kearny Mesa 1 90 90,000100% 1 39,51390 3

5 East County 1 86 86,000100% 1 7,93286 4

6 North Central County 1 78 78,000100% 1 9,16478 5

7 Outlying SD County N 1 8 7,650100% 1 4,6538 7

8 Carlsbad 0 - -- - 22,519- -

9 Chula Vista 0 - -- - 12,589- -

10 College Area 0 - -- - 10,469- -

All Other 0 - -- 22,057-

Totals 10 1,016 101,65091.8% 21,148933


SalesSan Diego Office

San Diego’s diversified tenant pool, low vacancies, andstrong rent growth continue attracting capital. Mostmoney invested in San Diego originates in California.Two-thirds of investment volume originated frominstitutional, private equity, or REIT concerns throughAugust. Market cap rates have held steady near 6%, ahigher yield than in either the industrial or apartmentsectors, and market pricing reached an all-time high thissummer. It took until June for a headline grabbing sale inSan Diego, after last year recorded the highestinvestment volume in a decade.

American Assets Trust purchased La Jolla Commons for$525 million, less a seller credit of approximately $11.5million, in June. The two office towers along with anentitled development parcel and two parking structureswere part of the deal. Hines and JP Morgan Chase soldthe property in what is the biggest office deal in the past20 years in San Diego. One of the towers was fullyleased to LPL Financial.

The deal for La Jolla Commons was followed by the saleof Genesee Plaza, in July, for approximately $90 million

($558/SF). JLL Income Property Trust acquired the twomedical/office buildings in UTC from PolidevInvestments. It was the second highest price paid for amedical office complex in San Diego in the past 20years. The buildings last sold at the end of 2014 for $72million. The UTC deals have helped bouy what had beena slow start to office investment in 2019.

The Corky McMillin Companies sold off more of itsLiberty Station portfolio in February 2019. IDS RealEstate Group acquired several office buildings for $76.8million. That comes after Corky McMillin sold theleasehold interest in its retail portfolio at Liberty Station inNovember 2018 to Seligman Western for $170 million.

When Congress passed the Tax Cuts and Jobs Act in2017, it established a new community developmentprogram. Opportunity Zones were established ineconomically distressed communities, where newinvestments may be eligible for preferential tax treatment.They are designed to spur economic development andjob creation in the zones. In San Diego, one of thelargest zones is in National City.

SALES VOLUME & MARKET SALE PRICE PER SF


Sales Past 12 MonthsSan Diego Office

399 6.1% $365 14.0%Sale Comparables Avg. Cap Rate Avg. Price/SF Avg. Vacancy At Sale

SALE COMPARABLE LOCATIONS

SALE COMPARABLES SUMMARY STATISTICS

Sales Attributes Low Average Median High

Sale Price $130,000 $9,969,883 $3,600,000 $268,702,396

Price Per SF $6.63 $365 $286 $1,894

Cap Rate 2.0% 6.1% 6.3% 8.6%

Time Since Sale in Months 0.1 6.4 6.4 12.0

Property Attributes Low Average Median High

Building SF 462 23,361 8,251 421,000

Stories 1 2 2 13

Typical Floor SF 462 9,611 4,995 79,942

Vacancy Rate At Sale 0% 14.0% 0% 100%

Year Built 1897 1978 1982 2019

Star Rating 2.4


Sales Past 12 MonthsSan Diego Office

Property Name - Address Rating Yr Built Bldg SF Vacancy Price Price/SF

Property

Sale Date

Sale

Cap Rate

RECENT SIGNIFICANT SALES

-1 La Jolla Commons Tower I2008 303,000 28.3% $268,702,396 $887

4747 Executive Dr6/20/2019 5.0%

-2 La Jolla Commons Towe…2014 421,000 0% $244,797,604 $581

4707 Executive Dr6/20/2019 5.0%

-3 One Del Mar2001 115,376 33.9% $73,350,000 $636

12544 High Bluff Dr11/6/2018 -

-4 12275 El Camino Real2006 79,501 7.3% $57,844,490 $72810/3/2018 -

-5 12265 El Camino Real2006 78,008 31.8% $54,793,868 $70210/3/2018 -

-6 12255 El Camino Real2006 74,526 0% $53,361,642 $71610/3/2018 -

-7 4161 Campus Point Ct1980 159,884 0% $50,302,872 $31512/28/2018 -

-8 Palomar Health Phase I2018 75,000 33.3% $47,300,000 $631

2125 Citracado Pky2/27/2019 -

-9 Genesee Plaza1983 81,684 16.9% $45,609,738 $558

9339 Genesee Ave7/3/2019 -

-10 Genesee Plaza1983 79,500 11.4% $44,390,262 $558

9333 Genesee Ave7/3/2019 -

-11 Regents Park Financial…1985 94,162 13.3% $39,500,000 $419

4180 La Jolla Village Dr11/30/2018 -

-12 Mesa View Plaza2002 111,268 0% $39,100,000 $351

9350 Waxie Way2/22/2019 -

-13 Bernardo Executive Center1984 55,354 13.6% $37,500,000 $677

16875 W Bernardo Dr9/12/2019 -

-14 Mission Valley Crossroads1979 138,747 6.4% $36,400,000 $262

404 Camino Del Rio S9/12/2019 -

-15 Chula Vista Medical Arts I1975 64,231 0% $32,795,686 $511

480 4th Ave5/15/2019 5.5%

-16 Sky Park Office Plaza1986 131,401 1.8% $32,345,194 $246

9275 Sky Park Ct7/15/2019 7.8%

-17 10260 Campus Point Dr1980 109,164 0% $29,697,128 $27212/28/2018 -

-18 6010 Hidden Valley Rd2002 49,580 8.9% $29,500,000 $59510/15/2018 5.8%

-19 Chula Vista Medical Arts II1985 36,586 45.5% $27,651,667 $756

450 4th Ave5/15/2019 5.5%

-20 Spectrum Corporate Plaza2008 83,278 8.5% $25,550,581 $307

9246 Lightwave Ave4/8/2019 -


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EconomySan Diego Office

San Diego’s economy is doing well by most measures.More than 80 research institutes are located in SanDiego, from Scripps Research Institute to Salk Institutefor Biological Studies, in addition to five universities. Thiscluster of research in the Golden Triangle has createdone of the strongest life science cores in the UnitedStates.

San Diego is also home to more than 140,000 activeduty military personnel. And the defense industryaccounts for 20% of jobs in San Diego. The militaryecosystem provides economic benefits to the regionunmatched by any other sector and supports cuttingedge innovation.

It is also why San Diego has one of the largestconcentrations of millennials in the country, accountingfor 27% of the population.

In the past 12 months, San Diego added 27,400 netnonfarm jobs. That is an increase of 1.8% since lastAugust. Employment grew by 6,600 in Professional andBusiness Services, the largest sector gain other thanGovernment's 8,400 new jobs. More specifically, 5,500jobs were added in the Professional, Scientific, &Technical Services sector. Trade, Transportation andUtilities recorded the largest year-over-year drop,shedding 2,900 jobs. That brought the unemploymentrate down to 3.4% in August, dipping from July's 3.6%rate.

Although the office market is performing well, a number

of residents are falling behind. The cost of living and lackof affordable housing in San Diego has led to slowingpopulation growth. It is now almost half the rate of what itwas earlier this cycle. Data indicates that residents aremoving to more cost-friendly areas, including InlandEmpire, Phoenix, Las Vegas and Texas.

The tech economy in San Diego contributes almost $30billion annually to the local economy, which is almost15% of San Diego's GDP, and employs 140,000 peopleaccording to the San Diego Regional EconomicDevelopment Corp. Those jobs pay an average of$132,000 compared with an average of $63,000 for jobsin the rest of the economy. Furthermore, Scripps Healthhas five campuses across the metro and announced thatit is spending $2.6 billion on upgrades to its facilities,further bolstering San Diego as a destination for "medicaltourism." The port, as well, supports more than 40,000jobs in San Diego and drives more than $8 billion ineconomic activity.

Major San Diego defense contractors are one of themetro's economic pillars. In fact, Northrop Grumman hasdesignated San Diego as one of its five “centers ofexcellence,” focusing on unmanned systems. The metroshould be able to avoid major defense cuts because itspecializes in the future of military spending: unmanneddrones and cybersecurity. And the Navy’s renewed focuson the Pacific theater of operation will result in a 60/40split between the Pacific and Atlantic fleets, as opposedto the current 50/50 split, further solidifying San Diego’sstatus as a major Navy hub.



SAN DIEGO EMPLOYMENT BY INDUSTRY IN THOUSANDS

NAICS Industry Jobs LQ MarketUS USMarketUSMarket

Current Jobs Current Growth 10 Yr Historical 5 Yr Forecast

-0.04%0.41%1.02%1.84%1.18%1.74%0.9115Manufacturing

0.43%1.09%1.24%1.20%0.96%-0.85%0.8224Trade, Transportation and Utilities

0.36%1.22%0.90%1.18%0.06%-1.54%0.9146 Retail Trade

0.33%0.06%1.07%0.99%0.89%0.36%0.977Financial Activities

0.75%0.90%0.04%1.27%0.48%2.26%1.1249Government

0.17%0.83%2.43%3.62%2.76%-1.43%1.085Natural Resources, Mining and Construction

0.53%1.09%2.11%2.96%2.02%1.40%0.9217Education and Health Services

0.93%0.87%2.72%2.41%2.20%2.09%1.2256Professional and Business Services

0.56%1.18%0.13%-1.55%-0.70%-0.45%0.824Information

0.57%0.96%2.54%3.03%2.46%2.08%1.2206Leisure and Hospitality

0.26%-0.03%1.02%2.03%1.30%3.54%1.058Other Services

Total Employment 1,511 1.0 1.27% 1.49% 2.03% 1.51% 0.84% 0.52%

Source: Oxford Economics

LQ = Location Quotient


YEAR OVER YEAR JOB GROWTH



DEMOGRAPHIC TRENDS

Current ChangeCurrent Level

Metro U.S.Metro U.S.Demographic Category

10-Year Change

Metro U.S. Metro U.S.

Forecast Change (5 Yrs)

Population 329,527,4063,369,047 0.7% 0.7% 1.0% 0.7% 0.8% 0.7%

Households 121,327,4611,138,115 0.6% 0.5% 0.9% 0.6% 0.7% 0.6%

Median Household Income $64,023$80,747 3.0% 3.3% 2.9% 2.4% 4.5% 4.3%

Labor Force 163,641,5471,616,332 1.2% 1.0% 0.4% 0.6% 0.7% 0.5%

Unemployment 3.6%3.1% -0.1% -0.2% -0.7% -0.6% - -


POPULATION GROWTH


LABOR FORCE GROWTH INCOME GROWTH


Documents

Office Market Report - NAI San Diego · 11085 Torreyana Rd Torrey Pines 22,550 Q1 19 Bioatla LLC Cresa - San Diego CBRE. San Diego Office. San Diego Office. San Diego Office. 3 -