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July 25, 2021
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San Diego Office Market Ends the Year with Tight Supply


This report was provided to us by Patrick Ashton, Senior Research Analyst with the San Diego office of JLL

The San Diego office market had another robust year of demand, totaling 902.6k sf of positive net absorption and exceeding the average annual positive net absorption average of 650k sf since 2008. With minimal new speculative office deliveries in 2018, demand exceeded new supply by over 200k sf, decreasing year-over-year vacancy by 100 basis points.

With the overall marketís total vacancy now at 11.65%, San Diego is the fourth tightest major office market in the nation, behind San Francisco (7.15), New York (7.3%), and Seattle (9.8%). The market is well under the United States total vacancy at 14.9%. In addition to vacancy being the lowest in the post-recession era, sublease vacancy is also currently the lowest since this cycle began, with a total of 530k sf.

For the regionís core office submarkets with 1.5 msf of inventory or greater, only three have vacancy rates notably higher than San Diegoís overall total vacancy rate. Although Del Mar Heights, Carlsbad and Sorrento Mesa ended 2018 with vacancy rates over 15%, these submarkets are expected to decrease in 2019. Sorrento Mesa currently has no new supply coming online and a total of 200k sf of net new leasing that is scheduled to be absorbed in early 2019, therefore decreasing the submarketís vacancy to the mid-teens. Del Mar Heights also started 2019 with strong leasing activity, and currently has a total of over 50k sf of scheduled new move-ins for 2019.

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