Q4 2023: San Diego Office Market Report
In the past year, leasing volume in San Diego has dropped by approximately 30 percent compared to the period between 2015 and 2019, reflecting a focus on efficient office space use. Despite stronger absorption in the fourth quarter, supported by the GSA’s occupation of 120,209 square feet, office dynamics show waning demand and increased availability across primary submarkets from Downtown to UTC. The trend indicates a decline in space occupied per employee, with a roughly 10 percent decrease since the end of 2019. Notably, leasing for spaces smaller than 5,000 square feet contributed to much of the new leasing volume in 2023, whereas demand for spaces above 50,000 square feet hit its lowest level in a decade. Available space accounts for 22.4 percent of total inventory, the highest in 20 years. Spec development contributed to rising availability. Sublet space, another significant factor, reached a record in 2023 but has retreated since the third quarter of 2023. Submarkets like UTC and Del Mar Heights/ Carmel Valley exhibit the highest levels of available sublet space, while Downtown, has been less exposed. Over the past year, San Diego’s vacancy headline rate held steady, driven by positive absorption in the fourth quarter.
Asking rates slightly decreased in 2023 in San Diego County, falling just three percent. However, with inflation rising and built-out expenses increasing by 50 percent, coupled with standard five months of rent abatement, effective rents are falling.
Asking rates slightly decreased in 2023 in San Diego County, falling just three percent. However, with inflation rising and built-out expenses increasing by 50 percent, coupled with standard five months of rent abatement, effective rents are falling.