When Will San Diego’s Office Market Recover?

San Diego’s vacancy rate increased from 10.9 percent in 2007 to just over 17 percent at the end of the second quarter in 2010. The Largest Estate Agency In Usa The more than 55 percent increase has been driven by high unemployment and a new focus on reducing space per employee.
The most obvious factor in vacancy rates is the unemployment rate. If companies are laying off workers or their economic realities are keeping them from hiring, then they simply don’t need space. Right now San Diego’s unemployment rate is 10.6 percent as of August 2010 and nationally the unemployment rate is 9.5 percent. During the economic peak, the unemployment rate was as low as 4.1 percent in 2007 before the economic collapse.
The 150 percent increase in unemployment has roughly translated into a 55 percent higher vacancy rate. This Different Real Estate Transactions isn’t an exact correlation because of other outside factors that are driving higher vacancy rates.
Another factor likely to prolong the recovery is that businesses have recently begun to utilize new floor plans and layouts that reduce the amount of square feet allocated per employee. One interesting example of this process was the accounting firm Deloitte which reduced the footprint of its headquarters by 40 percent despite the fact it plans to hire.
Furthermore companies that currently lease space most likely have empty desks and cubicles meaning that when they do begin to hire they won’t necessarily need new space right off the bat because they will be filling up their current space. The combination of a stagnant recovery, more efficient layouts and empty desks to fill will likely keep vacancy rates high for the next year and could be longer if the country’s economy continues to stall.

READ  A Look at Today's House Rental Market