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8/28/24
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Global real estate services firm JLL has just released the results of a study on the San Diego office market which suggests that future tenants may be challenged when looking for Class A space. This is due in part to the existing space aging and limited plans for new development in the foreseeable future.
Below are more details, per JLL:
Aging inventory: The average age of office facilities in the greater San Diego metro is 39 years, with over 62% of the buildings 30 years or older. The development of new projects has slowed down due to higher interest rates, leading to less options for high-end space. This could result in a lack of new quality spaces available in the next 6 to 24 months, particularly in prime locations. Demand for newer Class A space remains strong, especially in Downtown and UTC, where notable upcoming developments include Scripps Healthcare’s new HQ campus and SANDAG's newly built West project Downtown.
Current construction pipeline will provide limited options for tenants seeking new product: The current construction pipeline is limited, with deliveries falling short of the previous cycle's average by 1.3 msf. Representing only 0.7% of the current inventory, the new construction will contribute to vacancies once completed. The majority of the upcoming inventory is located Downtown, where 52% of the developments are taking place.
Thinning development pipeline and conversion redevelopment of aging office product: Due to a lack of new groundbreakings and the conversion of older buildings, supply constraints may arise as quality space gets leased up. This should help offset downsizes by tenants and maintain market stability.
Source: JLL Research
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