San Diego: Majority of the core office submarkets ended the year with tight supply

February 07, 2019
  • The San Diego office market had another robust year of demand totaling 902,582 square feet (s.f.) of positive net absorption, helping exceed the annual positive net absorption average of 650,000 s.f. since 2008. With minimal new speculative office deliveries in 2018, demand exceeded new supply by over 200,000 s.f., decreasing year-over-year vacancy by 100 basis points. With the overall markets total vacancy now at 11.6 percent, San Diego is the fourth tightest major office market in the nation, behind San Francisco (7.1 percent), New York (7.3 percent), and Seattle (9.8 percent). The market is well under the United States total vacancy at 14.9 percent. In addition to vacancy being the lowest in the post recession era, sublease vacancy has also been the lowest since this cycle with a total of 530,000 s.f.
  • For the core office submarkets with 1.5 million s.f. of inventory or greater, only three have vacancy notably higher than San Diego’s overall total vacancy. Although Del Mar Heights, Carlsbad, and Sorrento Mesa vacancy ended 2018 over 15 percent, we expect to see these submarkets to decrease in 2019. Sorrento Mesa currently has no new supply coming online and a total of 200,000 s.f. of net new leasing that is scheduled to be absorbed in early 2019 therefore decreasing the submarkets vacancy to the mid-teens. Del Mar Heights also started 2019 strong with new leasing activity, with a total of over 50,000 s.f. of scheduled of new move ins for 2019.

Source: JLL Research

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