San Diego Office Market
Rent growth has stalled, although the asking of $3.35/SF/Month remains at a historical high first reached at the end of 2022. Rents were up only 0.4% over the past year but have averaged 4.0% annual growth over the past five years.
Net absorption logged 624,713 SF in losses during the second quarter, the worst quarterly performance since 2015. Total vacancy climbed 100 basis points to 15.7%, the highest rate in more than 10 years. 5.1 MSF of construction is underway, an all-time high. Most of these projects, totaling 2.7 MSF, are in Downtown, which also has the highest vacancy rate in the county at 27.9%.
San Diego Industrial Market
The average asking rent reached an all-time high of $1.35/SF/Month, up 10.6% over the past year. The high number of larger, modern industrial facilities developed over the past several years is driving asking rates higher despite a slowdown in leasing. Net absorption was slightly negative with 71,228 SF in losses, which was a major improvement from the 902,350 SF in losses during the first quarter. Sublease availability has climbed to the highest level in 12 years as many companies that had pre-leased under-construction projects now look to shed excess space. Construction levels declined to 2.1 MSF after peaking at 5.8 MSF two years ago. Developers have scaled back pipelines as demand has fallen.