The local commercial real estate market is expected to significantly worsen before it gets better, according to an NAI Commercial Real Estate Services report.
"The great capital strike triggered by the collapse of the residential real estate market has spread globally, and has now rippled across virtually every market and sector," NAI wrote. "The 2009 outlook for the commercial real estate industry is rather bleak, characterized by a global recession, weakening market fundamentals, frozen credit, investors on the sidelines and millions of square feet of retail, office and industrial property re-entering the market as financial institutions, retailers and corporations retrench or close."
The report surveyed more than 200 markets around the world, including San Diego.
NAI said there are some reasons to be optimistic. The brokerage and research firm expects this to be an excellent year for investors if they can find the capital, and tenants may be able to obtain more favorable terms than they have for years.
The NAI report said the 25 percent decline in median home prices in the last two years (some reports say it's more), coupled with the turmoil in the financial and credit markets, has dealt a major blow to anyone who wants to fill space here.
"Office vacancy rates (in San Diego County) have increased 33 percent from 2007, from 12 to 18 percent as a result of new construction completions and poor absorption," the report stated.
San Diego's highest office vacancy rate is in downtown Class B space with a 28 percent level. Class A downtown had a 17 percent vacancy at the end of last year.
Class B in the suburban office market is faring better with a 13 percent vacancy at last check.
Los Angeles had a vacancy range of 24.2 percent for new construction in its suburban offices to just 4 percent in new downtown office construction.
The Inland Empire recorded a whopping 71.3 percent vacancy in its newly constructed Class A office space in a market that had seen a housing explosion just a few years earlier.
Looking at other cities around the world, Paris had a range of 8.5 percent for Class B space in it suburban markets to just 4 percent for new office construction in the city center.
While not as bad as the Inland Empire, the economic downturn also appears to be hurting Japan's office market.
The NAI report observed a 30 percent in vacancy for new construction in Tokyo's downtown office market and a 35 percent vacancy in new suburban office projects.
The report notes Japan experienced a record number of developer bankruptcies in 2008.
The NAI report noted that while San Diego still has a retail vacancy rate of less than 5 percent overall, store closures are having an impact on this market.
NAI said the retail vacancy here ranged from 2 percent in neighborhood service centers to 6 percent in regional malls during the fourth quarter of the year.
Los Angeles has seen a range in its retail vacancy from 3.4 percent in downtown percent to just 1.2 percent in regional malls.
Paris' retail vacancies weren't available, but most cities in Europe appeared to have retail vacancies that are roughly comparable to what we have in San Diego County.
Retail vacancies also range between 2.5 percent in the downtown markets to 5 percent for both community and power centers in most major European capitals. Tokyo also had about the same range.
San Diego County's industrial market also has seen vacancies rise, but still is running at less than 10 percent for most product types.
The one exception here is high tech/research and development space, which had a vacancy rate of 11 percent as last year drew to a close.
Los Angeles's industrial vacancy ranged in a narrow band from 3.4 percent for manufacturing space to 5.4 percent for high tech/R&D space.
By contrast, Inland Empire saw its industrial range from 7.6 percent to 12.5 percent by the end of last year.
Industrial numbers weren't available for most European cities, but most of those that did report recorded an industrial vacancy of less than 10 percent.
In another part of the world, Tokyo checked in with a 9 percent vacancy figure for its bulk warehouse space, but other statistics weren't available.