2022 Q1 Office San Diego Region
- San Diego County has recorded a fourth consecutive quarter of positive net absorption (+96,881 SF), bringing total demand to +780,997 SF over the last twelve months.
- Countywide overall vacancy increased 5 basis points (BPS) in Q1, leaving vacancy relatively unchanged at 13.42%.
- Office inventory in certain submarkets – notable Del Mar Heights/Carmel Valley – continues to contract as office projects continue to be converted or renovated into life science/wet lab space.
- Asking rental rates continue to increase, reaching countywide “full service” average of $3.05/SF across all classes and $3.62/SF for Class A space. This equated to year-over-year (YoY) increase of 4.5% and 4.9%, respectively.
San Diego office market poised for positive demand in 2022
From mid-2021 and into the first quarter of 2022, the dual pandemic surges brought on by two new COVID variants have appeared to subside. Long discussed and planned return-to-work policies appear to be underway – or will be soon – for many companies who have seen some or all of their employees working from home. The effects of the pandemic reduced overall demand by nearly 2.3 million SF of negative absorption in the five-quarter period from Q1 2020 through Q1 2021. The office market has slowly been recovering over the last four quarters from Q2 2021 through Q1 2022, increasing demand by 780,997 SF of positive absorption, effectively restoring over a third of the demand that was lost. While Q1 has had a slow start, it is expected to continue this trend throughout the remainder of the year. The traditional office inventory continues to contract in core markets as life science owners and developers are still acquiring and converting suitable properties into life science/wet lab buildings.