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San Diego office market positive in 2021 improving upon prior year of negative demand

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2021 Q4 Office San Diego Region

Key Takeaways

  • San Diego County has recorded a third consecutive quarter of positive net absorption (+415,432 SF), bringing 2021 total demand to a positive 377,111 SF
  • Countywide overall vacancy decreased 26 basis points (BPS) in Q4 to reach 13.30%.
  • Sublease vacancy that spiked in 2020, has continued to fall down to normal levels, ending the year at 0.74%.
  • Asking rental rates continue to increase, reaching countywide “full service” average of $3.02/SF across all classes and $3.59/SF for Class A space. This equated to year-over-year (YoY) increase of 3.1% and 5.3%, respectively.

San Diego office market positive in 2021 improving upon prior year of negative demand

The ongoing COVID pandemic that began in Q1 2020, took a major toll on demand in 2020 as nearly 2 million SF of negative absorption was recorded in office demand countywide. For five straight quarters, demand remained consistently negative all the way through Q1 2021 but turned around in the positive direction during the last three-quarters of 2021. This led to over 377,000 SF of positive net absorption being recorded for all of 2021, however vacancy decreased only slightly year-over-year. Current and near future demand is concentrated in new Class A speculative projects under development or recently completed by companies such as Kilroy Realty, American Assets Trust, and Lincoln Property Company. Traditional office inventory continues to shrink as premier life science developers continue to acquire office properties for redevelopment or renovation into life science accommodating flex buildings that will continue to bolster San Diego’s accelerating life science industry growth.


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San Diego office market positive in 2021 improving upon prior year of negative demand

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