San Diego Office Vacancy Heads Up, Again
In the second quarter, office availability grew 30 basis points to 20.7%, the highest since 2011.
Even the tech and life science sectors aren’t saving San Diego’s office market from the pandemic fallout. In the second quarter, the market’s office availability rate grew again, up 30 basis points to 20.7%. Now, the rate is the highest on record since 2011, according to the latest research from Savills.
At 22.4%, the class-A vacancy rate outpaces the market average. In the second quarter 2019 through the second quarter 2020, the class-A availability mirrored the market rate. Both turned upward once the pandemic struck.
Rents are also down. In the second quarter, average rents were $3.12, down from the first quarter when rents were $3.15 and 2.5% from the start of the pandemic. Class-A rents are also down to $3.49 per square foot. Prior to the pandemic, class-A rents were $3.51.
While the metrics give little to be excited about, leasing activity was the silver lining. In the second quarter, leasing activity tallied 1.2 million square feet, a significant increase from the .7 million square feet of leasing activity in the first quarter. It is the highest reported leasing activity since the start of the pandemic.
While tech and life science companies aren’t saving the market, they are driving the bulk of the leasing activity, thanks in large part to venture capital investment. In fact, demand for lab space increased 280% since March 2020 and office demand has already surpassed pre-COVID levels, according to research from JLL. This will likely support most office leasing activity and help to improve the metrics into 2022. According to JLL’s Tim Olson, senior managing director, the demand is driving both leasing and investment activity in the market.
AppFolio’s 40,297-square-foot lease at 8620 Spectrum Center Boulevard was the largest lease in the quarter. ClickUp’s 36,446-square-foot lease at 350 10th Avenue; Willis Towers Watson’s 32,806-square-foot lease at 2365 Northside Drive; and Prometheus Biosciences’ 27,834-square-foot lease at 3050 Science Park Road were the other significant leases to close during the quarter. Financial services firm Commonwealth Financial Network’s 30,862-square-foot lease at 110 W A Street was also among the top leases for the quarter.