San Diego: Steady Southern California
- Sep 27, 2017
The San Diego office market is on a steady course, as demand for quality space remains strong. The metro’s office inventory encompasses more than 72 million square feet, with a relatively balanced distribution between Class A and Class B space. Vacancy is lowest in primary locations such as the central business district, which boasts relatively modest lease rates.
San Diego is an established life science cluster and continues to attract both tech and science tenants. With some 27,000 jobs added in the 12 months ending in December 2016, employment in the metro increased 1.9 percent year-over-year, surpassing the 1.56 percent national growth rate. Strong demand for space with laboratories or research-and-development components has boosted rental pricing in coveted submarkets such as Torrey Pines, where average lease rates have reached $42.20 per square foot.
Development activity has picked up compared to the previous year, as more than 800,000 square feet of space is expected to come online by the end of the year. Nearly 9 million square feet of space is under various phases of development, while planned projects account for 66 percent of the pipeline.
Total transaction volume reached $728.8 million in the 12 months ending in July, as investors kept looking for good relative value in less expensive office markets. The metro’s CBD presents attractive investment opportunities at relatively modest prices ($213 per square foot). Meanwhile, Torrey Pines emerged as San Diego’s most transacted submarket, with average asking rates reaching a solid $537.60 per square foot in July.