The North County office submarkets from Oceanside to Del Mar aren’t necessarily going backwards but many aren’t improving either.
Voit Real Estate Services reported the Oceanside submarket posted 13,781 square feet of net absorption in the second quarter of 2012. The year-to-date figure was still a negative 1,428 square feet through June.
Voit reported the Oceanside submarket had about 230,000 square feet of available space in a 1.2 million-square-foot office market for an 18.94 percent availability rate.
Neighboring Carlsbad — still recovering from overbuilding in the middle of the last decade — hasn’t exactly been leasing enough space to make a difference in its 27.54 availability rate, according to Voit.
The Carlsbad submarket posted just 10,734 square feet of net absorption in the second quarter. The year-to-date figure was a negative 15,476 square feet.
As of the end of June, Carlsbad had a total of 1.64 million square feet of available space out of a 5.96 million-square-foot market, so filling the space could take quite some time.
The Rancho Bernardo office market, which at one time during the depths of the recession had vacancy rates that exceeded 20 percent, saw the level drop to 6 to 8 percent within the past couple of years, depending on the survey.
Rancho Bernardo benefited when Nokia (NYSE: NOK) moved out of more than 300,000 square feet in the Scripps Northridge complex to go into a smaller 200,000-square-foot space at The Summit in Rancho Bernardo in 2010. Nokia has done some belt tightening around the world, but it remains unclear whether these measures will impact its local space demands.
For now, Rancho Bernardo’s office vacancy rate may not be at its lowest — it is running at around 12 percent according to Voit — but that is still quite a healthy level considering where it was a few years ago.
Scripps Ranch is still trying to recover from the downturn and the loss of Nokia. Voit pegged the second quarter vacancy at 31.83 percent in that submarket with 865,991 square feet vacant out of a 2.72 million-square-foot total. While Scripps Ranch managed to absorb 105,380 square feet through the second quarter according to Voit, it still has a long way to go.
Del Mar Heights is another of those submarkets that has fluctuated over the years. Kilroy Realty Corp. (NYSE: KRC), which owns at least 5.5 million square feet in San Diego County, has roughly 1.2 million square feet of it in the Del Mar Heights/Carmel Valley submarket overlooking state Route 56.
Del Mar Heights and Kilroy’s properties took a big hit early in the last decade, when Peregrine Systems vacated 370,000 square feet of space, but the submarket quickly recovered.
Up until this latest downturn, Del Mar Heights was boasting $4 rents that were setting the high bar. After 2007, however, vacancies began to climb, and those $4 rents seemed a distant memory.
Today, while rents have been edging back upwards — $3.15-per-square-foot was Voit’s mid-year quoted figure — Del Mar Heights occupancy is once again a problem. With about 1.09 million square feet available out of a nearly 4.4 million-square-foot submarket, Del Mar Heights had a 24.77 percent availability rate at mid-year.
The University Towne Centre submarket, which like Del Mar Heights has been attractive to law firms such as Gordon Gerson and Stradling, Yocca, Carlson & Rauth has fared better. It still had a stubborn 20.58 percent availability rate on June 30. That translated to 1.6 million square feet available out of a 7.57 million-square-foot market, according to Voit.
The good news for the UTC submarket is that it has been helping itself. It absorbed about 300,000 square feet through June — nearly all of which was leased during the second quarter.
The Sorrento Mesa submarket continues to be helped by Qualcomm’s (Nasdaq: QCOM) expansions such as the 49,000-square-foot lease the firm signed with Kilroy at 10445 Pacific Center Court.
Qualcomm, which eventually hopes to construct another building adjacent to its 900,000-square-foot headquarters, has occupied at least 116,000 square feet of Sorrento Mesa space from Kilroy.
Qualcomm’s lease wasn’t enough to overcome the fact that tenants are still being impacted by the recession. It could be in much worse shape, however. While about 30,000 square feet was returned to the Sorrento Mesa submarket during the first half of the year, the availability rate was still only about 13 percent. The down side is this still translates to more than 1 million square feet of vacant space.
The Torrey Pines submarket continues to be fueled by biotechnology companies clamoring to be next to the various research firms as well as the University of California, San Diego, but here again, with the recession taking its toll on venture capital funds, there were more than a few empty spaces to be found.
In Torrey Pines’ case the difference between the vacancy rate (just 7.55 percent) and the availability rate (17.32 percent) at mid-year was enormous. The availability translated to about 570,212 square feet out of a 3.29 million-square-foot market. The net absorption through June was a minimal 23,781 square feet through the first half of the year, however.