COVID-19’s prolonged effects in San Diego sparks rise in sublease space

An uptick in new sublease space and upcoming lease expirations could disrupt market conditions

August 17, 2020
Top submarkets with most sublease availability (s.f.)
578,363 s.f. added net new post COVID from Sorrento Mesa, Downtown and Rancho Bernardo
Term length of sublease availability | Total of 2 million s.f.


4 years or less
(1.2 m.s.f)

  • Sublease availability has risen by 38% from Q1 2020, now totaling about 2.0 million s.f. in Q3 QTD (currently at 2.4% of the inventory). Together, the Sorrento Mesa and Downtown submarkets total 37.7% of the current sublease availability in San Diego. Additionally, 72% of sublease spaces to hit the market this year have come from the top five submarkets. Top five submarkets, including Sorrento Mesa, Downtown, Rancho Bernardo, Del Mar Heights and UTC, where sublease space has seen the most rapid growth.

  • Most of the subleases in Downtown, Sorrento Mesa, and Rancho Bernardo are being offered with long term lengths, which could pressure landlords in those submarkets to adjust their direct pricing more swiftly. These submarkets are heavily exposed by financial, tech, and business service industries.

  • The current sublease availability is at 13% of the total share of available space in the market (both direct and sublease). In past two real estate cycle downturns, landlords began lowering asking rates about 12-24 months after the sublease share has reached 15 percent of total availability. About 500,000 s.f. of new sublease space would need to be introduced in the second half of 2020 to reach this baseline. Another indicator that may disrupt office fundamentals is the 1.2 million s.f. of sublease space that is expiring over the next 36-months, that may impact future overall vacancy.