San Diego Office Market
Rent growth has stalled out as the average asking rate dipped one cent to $3.37/SF in the first quarter, barely up from the average of $3.35/SF a year ago. Net absorption posted 243,769 SF in losses this quarter. Total vacancy climbed to 16.2%, up from 14.6% in the year-ago quarter. Historically high construction levels and impending deliveries suggest vacancy will climb for the rest of the year. Construction hovered near the all-time record, with 5.9 MSF of projects still underway. Almost half of this total is based Downtown, and most of the pipeline is being built on a speculative basis. Sublease availability reached a new high of 3.2 MSF. Few sublease deals are being executed, and sublease listings are more likely to be taken to market directly by the landlord than to be leased.
San Diego Industrial Market
The average asking rent fell $0.01 to $1.37/SF NNN. Although asking rates appear to have peaked after rising vacancy, the first quarter average was up 5.4% over the year-ago quarter. Net absorption was negative for the quarter, posting 191,523 SF in losses, marking the fifth straight quarter of negative absorption. Sublease availability remains elevated with 2.2 MSF for sublet, compared to 10.9 MSF of available direct space. Construction levels have steadily fallen from the all-time high in 2021, with 1.5 MSF underway after 252,009 SF delivered this quarter.