Commercial real estate: Growing strength

The new Sempra Energy corporate headquarters building, developed by Cisterra Development, nears completion at Eighth and Island avenues in downtown San Diego. It is one of few major office buildings currently under construction locally. John Gastaldo

The new Sempra Energy corporate headquarters building, developed by Cisterra Development, nears completion at Eighth and Island avenues in downtown San Diego. It is one of few major office buildings currently under construction locally. John Gastaldo

San Diego County's commercial real estate market came alive in 2014 as vacancies dropped, rents rose and tenants occupied more space. But for 2015, local brokers expect little upturn in construction of office buildings because it's still cheaper to buy than build.

Still, optimism is growing that job growth is stimulating more space demand and, at least from landlords' standpoint, higher rents.

"There's definitely momentum in the marketplace," said CBRE industrial broker Chris Pascale. "People have a positive outlook."

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The key stimulant was the employment picture: Employers added 44,500 jobs to local payrolls last year, a 3.3 percent annual growth rate, a faster pace than in the rest of Southern California, the state and the nation.

"When people get hired, they need a place to work. So they will take space to house those folks. I think the job-creating piece is the most important piece for sure," Pascale said.

Rental rates rose but not enough to justify much new construction. No new large industrial projects were under way at the end of the year and only six office buildings were being built. New retail space under construction totaled 372,213 square feet in 19 buildings, but that was down 10 percent from the same time in 2013.

But there was some improvement, according to the Construction Industry Research Board. The total valuation of nonresidential building permits issued last year, $1.9 billion, was up 14.3 percent from 2013. New construction rose 58.8 percent to $1.1 billion, while additions and alterations dropped back from nearly 50 percent to 41.5 percent of all activity.

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Commercial real estate: Growing strength