Q2 2025 San Diego Office Market Report
San Diego’s office market remained down through the first half of 2025, with leasing volume continuing to hover 15–20% below pre-pandemic levels. Vacancy rose to 16.2%, partially driven by the delivery of 2.1 million square feet of new space primarily in Downtown. The market is expected to see vacancy continue to rise through 2025. Larger occupiers remain largely inactive, with deals over 25,000 square feet comprising just 10% of recent leasing activity.
Tenants with under 10,000 square feet footprints dominate leasing and make up 70% of transactions in the market. Many corporate occupiers are renewing or downsizing, and new lease activity is down 20% from the last cycle. Suburban submarkets, however, are a relative bright spot, particularly Del Mar Heights, Rancho Bernardo, and Kearny Mesa, where vacancy is lower and many new projects have already leased. Concessions have become standard across the region. Despite generous packages, rising construction and costs are putting pressure on both landlords and tenants, and some deals have collapsed due to capital shortfalls.
In Downtown, vacancy has surpassed 35%, with shadow space potentially pushing that figure to 50%. Occupiers have largely avoided the area despite discounted rents, and some landlords have defaulted on loans, resulting in a wave of distress sales. This is reshaping the Downtown office landscape, with some towers attempting to reposition. Office sales totaled $1.3 billion in the past 12 months—more than double the previous year. However, sale prices have compressed, and many high-vacancy assets are trading at steep discounts. Investors are targeting conversion opportunities or fully leased assets with secure cash flow.
Tenants with under 10,000 square feet footprints dominate leasing and make up 70% of transactions in the market. Many corporate occupiers are renewing or downsizing, and new lease activity is down 20% from the last cycle. Suburban submarkets, however, are a relative bright spot, particularly Del Mar Heights, Rancho Bernardo, and Kearny Mesa, where vacancy is lower and many new projects have already leased. Concessions have become standard across the region. Despite generous packages, rising construction and costs are putting pressure on both landlords and tenants, and some deals have collapsed due to capital shortfalls.
In Downtown, vacancy has surpassed 35%, with shadow space potentially pushing that figure to 50%. Occupiers have largely avoided the area despite discounted rents, and some landlords have defaulted on loans, resulting in a wave of distress sales. This is reshaping the Downtown office landscape, with some towers attempting to reposition. Office sales totaled $1.3 billion in the past 12 months—more than double the previous year. However, sale prices have compressed, and many high-vacancy assets are trading at steep discounts. Investors are targeting conversion opportunities or fully leased assets with secure cash flow.