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Next Year To Bring More Growth, Demand For San Diego Properties

As goes the economy, so goes San Diego commercial real estate into 2018.

If the economy continues to grow as expected, the stock market continues its rally and favorable tax incentives pass, the San Diego outlook is rosy for the coming year, Sunroad Asset Management President Dan Feldman said. He expects the steady growth of 2017 will continue.

San Diego shoreline

"I think we're lucky to be in San Diego where you have barriers to entry and it's a market where if you have assets they continue to increase in value," he said. "As long as San Diego and the economy overall continue to tick upwards, you're going to be sitting in a good spot waiting to absorb that increased demand."

Feldman would like the city to attract more large companies, giving it the weight that industry giants bring to the Bay Area, LA or Seattle.

"That would be a game-changer for San Diego's economy," he said.

While Amazon HQ2 is unlikely to land in the coastal city, there is opportunity for the area's growing life science, biotech and healthcare industries to continue to drive the office market, he said.

The city's multifamily sector also has a strong outlook, with delivery volume up for the quarter, but demand still outpacing supply. That is expected to continue.

Millennials and baby boomers want to live in core areas near shopping and transportation and where the action is, Feldman said. These "renters by choice" are driving the conversation over how rental communities are equipped when it comes to finishes or amenities, he said.

"When you add the fact that it's very difficult to have affordable homes anywhere in San Diego County, particularly near job centers, we see a lot of demand on the multifamily side," Feldman said.

He questions how much absorption there will be from the high-end communities coming online downtown in the next few years. That could have an effect on whether those rents continue to push upward.

But overall multifamily will be in strong demand, and outlying markets such as Kearny Mesa, University Towne Center and Carmel Valley have been experiencing solid growth, he said.

Industrial has been on the upswing throughout SoCal and San Diego will continue to benefit from that into 2018.

Sunroad has several fully entitled properties in Otay, and Feldman said the continued importance of cross-border manufacturing and trade coupled with the challenges of getting properties entitled in that area makes those properties valuable.

"We're extremely bullish on the Otay market," he said. "We think that industrial base is ripe for development in 2018 and '19."

Hear more from Feldman and other San Diego experts at Bisnow's Word on the Beach: San Diego State of the Market event Jan. 25.