San Diego Real Estate Market Reports

San Diego Office Market

The average monthly asking rate fell slightly from last quarter’s all-time high to $3.48/SF. The current rate is 2.2% higher than 12 months ago. Net absorption has been essentially flat all year, posting modest gains of 9,046 SF for the quarter and year-to-date losses of 43,989 SF. Leasing activity remained low, totaling 878,150 SF for the quarter. Total vacancy climbed to 20.2%, up 290 basis points over the past year as large deliveries introduced a large amount of new vacant space to the market. 280,761 SF of new office space delivered this quarter, coming on the heels of a record-setting 2.9 MSF of new deliveries during the first half of the year. The pipeline has contracted significantly, with only 1.4 MSF of under-construction space remaining. Sublease availability totaled 2.5 MSF, representing 3.2% of existing inventory. This is in line with the 5-year average and down from 4.3% a year ago.

San Diego Industrial Market

The average asking rent fell to $1.43/SF NNN, down 3.6% over the past year. Asking rents have fallen from the historical peak in 2023 as leasing activity has slowed and vacancy rates have climbed. Total vacancy climbed to 7.8%, mostly unchanged from the previous quarter but up 270 basis points over the past year and near a 10-year high. Net absorption posted 261,846 SF of gains for the third quarter, the first positive net absorption since the fourth quarter of 2022. Sublet availability fell slightly from the previous quarter’s all-time to 3.2 MSF, still well above the 10-year average of 1.6 MSF. One 124,000-SF project delivered as construction activity fell to 1.3 MSF. This level represents 0.8% of existing inventory, below the 10-year average of 1.2%.

San Diego Life Science Market

Asking rents in the core submarkets declined to $5.37/SF NNN, down 6.7% over the past year, as elevated vacancy has put pressure on landlords. Net absorption was barely positive, posting 5,310 SF in gains for the quarter. Year-to-date, the market has experienced 497,484 SF in negative net absorption. Total vacancy plateaued at 26.4%, still at an all-time high, up from 16.9% a year ago. 2.0 MSF of new deliveries and negative absorption in the first half of the year contributed to the high level of vacancy. Sublease availability remained elevated at 1.6 MSF, slightly lower than last year. 427,000 SF of construction is currently underway in the core submarkets after the pipeline dramatically reduced over the past two years.