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1/05/26
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SAN DIEGO 2025 Year-End Office Market Review
This update provided by real estate services firm JLL
Executive summary
• San Diego maintains the lowest vacancy among major U.S. office markets. Suburban Class A continues to outperform; Downtown vacancy rising due to speculative deliveries: Limited vacancy exists in new multi-tenant construction properties, reinforcing the continued premium commanded by quality assets in the central core cluster submarkets. Meanwhile, a significant amount of new, unleased office space delivered in Downtown during 2024 and 2025, increasing vacancy and putting downward pressure on rents in the urban area.
• Flight to quality persists as tenants gravitate to newer high-quality buildings.: New construction and well-amenitized projects are experiencing minimal vacancy rates while achieving higher rents as tenants prioritize high-quality space. Although demand is still below historical levels with increasing demand for quality Class A products in select submarkets (UTC, Del Mar Heights and Mission Valley).
• RTO – slowly improving as job market softens and back to work mandates intensify: Comparing return-to-office levels through Q3 2025 year-to-date to 2024 monthly averages, core submarkets demonstrating stronger recovery typically feature either diversified industry compositions or proximity to central suburban districts. Mission Valley and Kearny Mesa stand out as the top two submarkets seeing significant RTO improvements.
• Sales activity is gradually rebounding as buyers pursue properties with either prime locations or attractive pricing: Investment sales saw a noticeable uptick over the last 9 months, with historically low pricing for trophy office assets in submarkets experiencing transition.
• Tech and Defense industries remain the dominant office occupier: Tech firms are driving leasing activity in suburban areas such as Sorrento Mesa, Rancho Bernardo, Del Mar Heights and UTC; while Downtown faces challenges from downsizing financial and legal firms.
Takeaways
• High-quality suburban Class A assets are experiencing stronger absorption and rent premiums.
• Investment activity is rebounding as discounted pricing attracts buyers.
• Technology, defense, and AI-driven innovation are poised to shape the next leasing cycle.
• Despite softening rent growth and ongoing tenant downsizing, several stabilizing factors—including office-to-housing conversions and limited future speculative development—should support medium-term market resilience.
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