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10/28/22
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This report was provided by real estate services firm Cushman & Wakefield
Economic Overview
The total nonfarm employment in San Diego grew by 59,600 or +4.1% year-over-year (YOY) between August 2021 through August 2022, with the leisure and hospitality sector accounting for the most significant gains or 25,300 jobs added (+14.1% YOY). During the same time, the monthly unemployment rate decreased from 6.5% last year to 3.4% and is currently 30 basis points (bps) above the quarterly average of 3.1%.1 All employment sectors are expected to grow at a combined rate of 5.3% (+76,370 jobs) in 2022, while office employment is forecasted to grow by 3.0% (+11,260 jobs) and high-tech employment by 2.9% (+4,140 jobs). The annual unemployment rate is forecasted to decrease from 6.5% in 2021 to 3.6% in 2022 and 3.3% in 2023. San Diego’s economy of $252.1 bil as measured by 2021 gross regional product is forecasted to grow 3.9% in 2022 and 1.9% in 2023.2
Supply and Demand
Retail overall vacancy, including sublease, decreased 40 bps quarter-over-quarter (QOQ) to 5.0% and is 130 bps lower than a year ago. The current vacancy is 10 bps below the 10-year quarterly average of 5.1% and 210 bps below the peak rate of 7.1% recorded in Q1 2011. Occupancy increased by 342.1k sf across all center types in Q3 2022. Neighborhood centers absorbed the most space at 196.3k sf, followed by community centers at 98.2k sf, strip centers at 26.5k sf, power centers at 25.6k sf and lifestyle centers at 14.8k sf. Regional centers returned 19.4k sf. On annual basis, occupancy increased by 885.7k sf during the first nine months. There are currently seven projects totaling 334.8k sf under construction, the majority of which are in South County.
Pricing
Countywide overall asking rent across all classes increased slightly to $2.10 per square foot (psf) on a monthly triple net basis, an increase of 1.4% QOQ and down 15.0% YOY. The average asking rent is currently $0.16 above the 10-year quarterly average of $1.94 psf. The YOY decrease is largely caused by the withdrawal of public asking rents at regional centers, affecting average asking rent calculations. Rents at community centers increased 2.9% to $2.40 psf, while rents at strip centers increased 0.9% to $2.37 psf
Sales Activity
The San Diego retail market recorded $276 mil in sales volume across 21 centers and 651k sf in Q3 2022 compared to $282 mil in Q2 2022 (-2.3% QOQ) and $402 mil in Q3 2021 (-31.4% YOY). The average price was $385 psf in Q3 2022 compared to $295 in Q3 2021 (+30.6% YOY). In 2022 so far, private investors comprised 64% of buyers (vs. 64% in 2021) and 79% of sellers (vs. 69% in 2021).
This report was prepared by:
Justin Balagtas
Senior Research Analyst
Jolanta Campion
Senior Research Director, Southern California
Cushman & Wakefield
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