Demand for Lab Space Increased 280% in San Diego During Pandemic

The office and lab space market San Diego has already roared back. Demand for lab space increased 280% since March 2020 and office demand has already surpassed pre-COVID levels, according to research from JLL. The demand is driving both leasing and investment activity in the market.

“The expansion of big tech and the incredible growth in the life sciences industry, which is displacing office tenants as offices buildings are converted to lab buildings, have been the driving forces behind the San Diego office leasing activity,” Tim Olson, senior managing director at JLL, tells GlobeSt.com. Confidence in the re-opening of businesses, easing of COVID restrictions, consumer demand, and an overall sense of confidence in the market has been contributing factors as well. Employers and employees alike are willing to get back to the office setting with an eagerness to move past the last year and a half.”

Employees are also ready to return to the office, according to Olson. He says that the eagerness to return to the office is driving a flight to quality for companies to both attract and retain talent. “In short, the office work force is ready to get back to work and the office opportunities are there for companies looking to relocate, reconfigure, downsize or expand,” says Olson. “They want to and need to be in nice office space in order to get people excited about coming back to work.”

Olson says that easing COVID restrictions are playing a role too. Not only can companies return to the office, but the reopening has also supported local economic growth, which is also driving real estate activity. “The local economy has started to regain its pre-COVID momentum,” he says. “The lifting of California health ordinances coupled with more individuals receiving the vaccine have caused employers to re-focus their efforts on re-entry into the office. Therefore demand has increased post-COVID and inquiry, touring activity and proposal negotiations returned and surpassed pre-COVID levels.”

Olson is seeing leasing demand across industries, but tech is the major driver of demand in the first half of the year. He names wireless technology companies, semiconductor, computer technology and gaming firms as the most active players. “Closely following are engineering firms and financial service-related companies,” he adds. This includes companies relocating and expanding.

The office market is poised for continued growth this year. “We are experiencing a demonstrable flight to quality, and with office-to-life science conversions and big-tech growth, the class-A supply is dwindling,” says Olson. “With a supply-constrained environment in some markets, we expect to see more interest in class-B office product throughout the county, especially for projects that have been or are being modernized.”