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27% of Office Space Vacant, Survey Finds

March 04, 1986|COLLEEN COSTELLO | Times Staff Writer

It is still a buyer's market for office space in San Diego County, as office vacancy rates jumped to 27.3% for the first six months of 1985, up from 21.3% at year-end 1984, according to a San Diego Chamber of Commerce survey.

Empty office space in the county totaled 6.2 million square feet as of June 30, the most recent figures available, according to the Chamber's Economic Research Bureau.

In downtown San Diego, Mission Valley and La Jolla--the areas with the largest number of empty offices--vacant office space reached more than 18 million square feet, including existing space, space under construction and proposed projects, the report showed.

Downtown San Diego reported 665,533 square feet of new space as of June 30, an increase of nearly 11% in one year. It was the most active new-construction area in the county, the chamber said.

Office space countywide--both under construction and existing--is projected to increase 44% to 33.3 million square feet by 1990, the Chamber said.

Sorrento Valley was the county's second most-active area, with 478,500 square feet of new space, or 56% more space than in 1984.

Kearny Mesa added 473,776 square feet to its office inventory since the last survey, a 19% increase, followed by the University Towne Centre-Golden Triangle area, where the office market increased by more than 51%, with 441,855 square feet available.

More activity is planned for downtown, as more than 2 million square feet of office space is in the works. More than 1 million square feet is planned for both Mission Valley and the University Towne Centre-Golden Triangle area.

Sorrento Valley also had the most office space under construction, with 614,482 square feet, the report said. Kearny Mesa reported the second most-active market with 545,278 square feet under construction.

"We have concessions that offer a wide variety and quality space," said Max Schetter, director of the Chamber's Economic Research Bureau.

The bureau's 11-month survey included more than 23 million square feet of existing office space in 568 buildings throughout the county.

The Koll Co., a real estate development firm, conducted its own office-space availability study in February, and its results show a lower vacancy rate. The company tracked vacancies at buildings Koll considered competition for its downtown high-rises, specifically the Wells Fargo Bank building and the Central Savings Tower. Of the 5.3 million square feet included in the study, 1.1 million square feet, or 20.8%, was vacant.

"The high vacancy factor has led some owners to offer extreme concessions to tenants, such as one or two years' free rent," said DeAnn Reynolds, marketing manager for Koll's southern division.

That trend is subsiding, however, as owners realize that such huge concessions are decreasing their buildings' value, Reynolds said.

Koll Co. buildings downtown had a 12% vacancy rate--in contrast to the overall vacancy rate of 20.8%--with 715,821 leasable square feet.

Trammell Crow, a real estate and development firm that owns the Imperial Bank Tower downtown, said it has 541,720 rentable square feet, or a 17% vacancy rate, available within the tower.

"We think we will lease about 95% of the space by year's end," said building spokesman Matt Spathas.

Trammell Crow recently purchased the city block between 8th and 9th avenues and B and C streets with intentions of razing the YMCA building and erecting a high-rise similar to the Imperial Bank building.

Although San Diego's 6.2 million square feet of empty office space is high, it's not nearly as high as other major U.S. metropolitan areas. According to a study by Houston-based Office Network, the five cities with the highest number of vacant office space as of June 30 were: Chicago (40.5 million square feet), Dallas (39.2 million), Houston (38.1 million), Los Angeles (34.3 million), and Washington (27.6 million.)

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