SD’s offices recovering, unsteadily, in 2014

The AT&T San Diego Data Center at 7337 Trade St. in Mira Mesa sold for $134.5 million in December, according to CBRE brokerage. The buyer was Carter Validus Mission Critical REIT of Tampa and the seller, AT&T, which leased back the 499,402-squre-foot facility. It was the fourth largest office transaction of 2013, according to Cassidy Turley brokerage.

Five years after San Diego Countys office market troughed, rents, occupancy and construction are recovering at a slow, not always steady, pace.

The most-watched indicator is vacancy rates they were down to 14.7 percent in the fourth quarter, compared with 15.2 percent a year earlier and 18 percent at the end of the recession in 2009.

That slow climb from a deep hole is not a bad thing, considering the office markets history of boom-and-bust cycles.

The scrutiny on these developments is much more in play than its ever been in the past, said Duncan Todd, senior vice president of Cassidy Turleys office division in San Diego.

Other benchmarks revealed conflicting trends:

The region ranked 10th nationally in posting a 4.3 percent rental increase and is now halfway back from the bottom reached in late 2011.

Only 887,000 square feet was leased countywide, down 29 percent from 2012 a horrible bottom line, said Cassidy Turley broker Brett Ward.

Nearly 1.7 million square feet of office space is under construction, 81 percent more than at this time last year.

The five biggest office sale transactions sold for a combined $772.9 million, including the latest, the AT&T San Diego Data Center in Mira Mesa, which closed escrow last month for $134.5 million.

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SD's offices recovering, unsteadily, in 2014