Q2 2023 San Diego Office Market Report

Despite positive trends in leasing activity, the San Diego office market faces challenges. Leasing volume is down by approximately 20 percent compared to 2016-2019, with average lease sizes shrinking by roughly 10 percent. Vacancy rates have risen by 200 basis points since the end of 2019 and around 12 percent of San Diego’s office inventory is less than 75 percent leased.

Additionally, there is concern about the record-high availability rate at 16.9 percent with roughly 7 million square feet additionally available now than at the end of 2019. However, the vacancy trend has been downward for the region’s newest buildings. Downtown is expected to receive a substantial addition of lab and traditional office development scheduled to begin delivering this year, which has not seen any pre-leasing.

Tenants continue to sublet underutilized office space placing pressure on vacancy. Sublet space is trending at a 15-year high and is increasingly being added in newer buildings. Many of the recent sublet additions have come from San Diego’s leading industries, indicating no formulaic solution.