While still coming down from its record-high sales volume of Q3 2017, the San Diego office market almost fell into the other extreme and wrapped up Q1 2018 with the second-lowest sales volume since Q1 2014, according to a report from CommercialCafé. The market saw a total of five sales close since the beginning of the year, adding up to $151 million in sales volume and signaling a 60 percent decrease year-over-year and an almost 70 percent drop compared to the previous quarter.
The largest transaction in San Diego in Q1 was the purchase of the 197,832-square-foot Gateway at Torrey Hills complex by the Irvine Company for $105 million in January, a deal that accounted for 70 percent of the market’s sales volume in the first quarter, according to the report. The class-A property is conveniently located along Interstate 5 and includes the four-story Gateway at Torrey Hills North and Gateway at Torrey Hills South multi-tenant office buildings. The working community is located in Del Mar Heights — one of San Diego County’s most affluent submarkets — and was 80 percent leased at the time of sale, according to the Cushman & Wakefield Capital Markets team that represented the seller.
Sales recorded in San Diego often exceed $300 million per quarter, according to sales data trailing five years, proving that this market maintains healthy fundamentals regardless of the occasional hiccups, the report states. The average price per square foot followed sales volume on a downward trend, dropping 35 percent and resting at $160 at the end of Q1. This also marks the first time in two years that San Diego office prices slipped below the $200-per-square-foot threshold.