With more than one million square feet of leasing activity in 2012, technology tenants drive a huge portion of office space demand in San Diego. Attracting high-tech firms of every size, from large-cap firms to smaller entrepreneurial companies, is part of San Diego's appeal, and this diversity has helped continually expand office space demand from tech users over the past decade, even during the recession.

“San Diego continues to be a place where people, particularly young people, want to live; an important consideration for locating a technology company,” says Jay Alexander, managing director at JLL, who is currently working with the owners of San Diego Tech Center to plan and position their impending expansion of the prestigious San Diego technology office property. “Additionally, we have creative office space opportunities suited to technology firms and a diverse mix of influential technology companies.”

And according to Brett Ward, senior vice president and office market specialist with Cassidy Turley, the pace of the San Diego office market recovery is moving faster than expected, with 140,000 square feet of net absorption during the first quarter of 2013. “This is good news for landlords with countywide vacancy continuing its downward slide, now solidly below 15%... If the current pace continues, San Diego is poised to see another strong year for net absorption.”

According to Ward, class B product has been the shining star of the San Diego office market for the past two quarters. Vacancy for this segment of the market has dropped from 20% to 17% since Sept.30, 2012.

“The class A market has finally stabilized and rental rates are rising,” he says. “As a result, the flight to quality trend that drove tenant activity for the past five plus years has shifted, with companies now re-focusing their attention on well-located class B buildings. Class B product was the segment holding back the overall health of the office market and the one those in the industry have been waiting to see turn.”