John will start the call with an overview of the quarter and in a bit of a change from prior quarters will provide general commentary on our various markets rather than specific market statistics. We've added a page to our supplemental that includes the detailed market data. I'll follow John with financial highlights and updated earnings guidance for 2010. And then we'll be happy to take your questions. John?John Kilroy Thanks, Tyler. Hello, everyone, and thank you for joining us today. We had another fast-paced and successful quarter at KRC. We're excited to report continued leasing success as well as announced that we are under contract on two new acquisitions. Let me start with a brief review of our market conditions. Overall, we believe we have seen the bottom in most of our markets, although the recovery is relatively muted by historical standards. Having said that, San Diego has now experienced positive absorption for three quarters in a row and we are now 82% occupied and 87% leased there. The Orange County industrial market had slightly negatively absorption in the third quarter, but we have moved our occupancy to 90% and over 94% leased in that market. The Orange County office market had positive absorption for the first time since 2007. In Los Angeles and Ventura Counties, we're seeing modest activity. Absorption was slight negative in the third quarter, but our occupancy is holding at 90%. That's down from 93% at the end of the second quarter, driven partially by taking our 300,000-square-foot 2260 building previously occupied by Boeing in El Segundo out of service for planned redevelopment that commenced in August. And finally, in the South Financial District of San Francisco where our 303 Second Street building is located and where one of our just announced acquisition is also located, demand is growing with total vacancy rate of 12.6%, a full 5 points below that of the overall market. Jones Lang LaSalle has reported a quarter-over-quarter rate increases of 7% in this submarket, driven by significant demand from the tech sector. In addition, one of San Francisco's premium real estate brokerage firms, CAC, is reporting that 2010 will be the biggest year yet in terms of leasing with tech-related companies.
At KRC, we're benefitting from these modest improvements in market conditions as well as a tenant credit quality and an increased preference by tenants to do business with well-capitalized landlords. We maintained strong leasing traction during the quarter and signed almost 462,000 square feet of leases. Year-to-date, we've now signed leases on more than 1.3 million square feet, about 80% of leased transactions in the third quarter for office space. Over 50% were in the San Diego submarkets and about two-thirds of the transactions were on Vegas space.Strong leasing continues to boost our occupancy levels. At the end of the third quarter, occupancy in our stabilized portfolio was 86.4%, up from 85.1% at the end of the second quarter and up 360 basis points from 82.8% at yearend 2009. Our stabilized portfolio was 89% leased at the end of the quarter. Since the end of the third quarter, we've signed additional leases totaling 227,000 square feet, including a large industrial lease in our Orange County industrial portfolio. In addition, we now have approximately 550,000 square feet of unplaced letters of intent of which about half are for new leases and half are for office space in San Diego. Based upon the level of interest that we're seeing to date throughout most of our portfolio, particularly in San Diego and Orange County, we anticipate that we will continue to make occupancy gains. Turning to our growth initiatives, our investment strategy is simple and straightforward. We aim to take advantage of certain inflection points as the real estate cycle progresses. In the early stages where we're right now, our strategy is to buy high-quality, irreplaceable core assets in top tier markets at discounts to replacement cost. We seek well-leased properties with sufficient term to get us to a better point in the cycle. This should generate good stabilized yields with the ability to grow them over time. Read the rest of this transcript for free on seekingalpha.com