What’s Driving Up San Diego’s Office Rents?

Russell: “Rents will continue to increase at a modest pace, probably 3% to 4% per year.”

SAN DIEGO—This is San Diego’s eighth consecutive year of positive office absorption, with very little new supply added to market, causing vacancy rates to tighten and rental rates to rise, JLL managing director Tony Russell tells GlobeSt.com. The firm recently reported that class-A average monthly asking rental rates in the market are now $3.25 per square foot full service gross, having surpassed the previous peak at $3.23 FSG reached in 2007. And, overall asking rates for class-A and -B remain robust with 28% growth since the recession.

The report also revealed that class-B absorption increased by 356,490 through the first half of 2017, signifying that rents can be expected to increase in this segment. The scientific and technical sectors expanding and relocating to the Del Mar, UTC/Eastgate and Downtown submarkets have been the driving force for rent premiums, with newly delivered Torrey Point setting a new high-water mark with asking rates at $5.75 FSG, 76% higher than the class-A overall average.