The Incredibly Shrinking Tenant
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|When it comes to leasing space, companies are still reaching for their shoe horns and trying to fit into smaller spaces. (Wrestlers and brides could make a killing offering last minute weight-loss advice.) The latest stats from Cassidy Turley San Diego finds ?right-sizing? tenants are reducing their footprints, though leasing activity hasn?t declined.|
|Yesterday, we chatted with director of research Jolanta Campion. She tells us leasing activity is healthy, with tenants signing nearly as many leases as in the previous quarter and year. Of the 1,521 office properties the firm tracks countywide, 16% reported positive net absorption totaling 984k SF in Q3, compared to 13% reporting negative absorption totaling 1M SF. (Net absorption remains on the positive side YTD.) Jolanta says tenants are taking less space, moving from 5,353 SF into 4,119 SF—a 23% average decrease. (This is the first time she's included this stat—an average crunched from all the space tenants vacated and occupied during Q3.) Jolanta calls this ?lessons learned from the last recession? as tenants evaluate their needs. ?We're all trying to do more with less, and tenants are no different.? One of the quarter's largest leases was Qualcomm's take-down of 76k SF at San Diego Tech Center (above).|
|Jolanta notes Class-A space continues to lead activity, with positive absorption for 13 consecutive quarters, or a total of 2.7M SF over the past three years. As a result, Class-A vacancy declined to 14.9% countywide (compared to 18.1% overall), down from the peak of 23% three years ago. In addition, the average Class-A space tenants moved into during Q3, compared to the space they vacated, declined just 9%. Meanwhile, Class-A asking rates increased 5 cents to $2.68/SF per month, compared to a penny boost for all classes. With tenants in the market looking for 2.5M SF over the next 24 years, Jolanta expects leasing activity to strengthen.|