San Diego premium office rents come at a cost
Due to high demand for quality office space, Class A average first year rents and effective rents are up by 2.0 and 5.7 percent respectively, on a three-year rolling average.
October 16, 2019
- The above table contains six key performance indicators for the San Diego office market on a rolling 12-month trend compared to the rolling 36-month trend; sampling of 36-month direct lease terms and longer. Due to high demand for quality office space, Class A average first year rents and effective rents are up by 2.0 and 5.7 percent respectively, on a three-year rolling average. In addition to high demand driving rental rate increases, construction costs have risen with tenant improvement (TI) allowances escalating by 21.4 percent over the past year. The dramatic increase in construction costs and subsequent tenant improvement allowances are in part due to recent tariffs on raw materials and a shortage of construction labor.
- Another key takeaway from the 12-month compared to the 36-month rolling average is despite the shrinking average lease size for all classes (A,B,C), the count of leases is higher than the 36-month average of 585 per year. Although the average lease size decreased slightly, leasing velocity has seen an uptick in the small to mid-size range, meaning coworking has not impacted the overall office leasing dynamics for smaller sized businesses in the past year. Rather, companies have been outgrowing their footprint within co-working space and relocating into their own direct space.
Source: JLL Research