SAN DIEGO—Office space market conditions are tightening in San Diego, and class A rents are holding steady, according to a third-quarter report from Savills Studley.

Those trends vary depending on the submarket, according to the firm's San Diego Office Sector Report:

Companies seeking life science and R&D space in Torrey Pines, UTC and Carmel

Valley must start their search early and be ready to jump quickly as steady demand has

depleted availability. Smaller and mid-sized traditional office space users, who can cast

a wider net geographically, do not have as much urgency but are encountering higher

asking rents and reduced concessions as landlord optimism grows--even Downtown.

“Traditional space users remain tentative and focused on containing costs. Still, availability has pushed lower due to steady activity in the tech and life sciences sector,” said Mike Labelle, SVP with Savills Studley.

Class A asking rents were essentially unchanged in the third quarter, nudging up from $2.85 to $2.86. They have jumped by 5.8% year-on-year.

The region's overall availability rate fell by 0.2 percentage points in the third quarter, declining to 19.1%, and has decreased by 0.3 percentage points year-on-year, the report notes. Leasing activity have “cooled a bit” Savills Studley notes, in part due to major defections to other markets:

San Diego and many other California cities are still dealing with the exodus of some

businesses to lower-cost states such as Colorado and Texas. Two more Vista Equity Partners subsidiaries, Active Network and Omnitracs, announced the relocation of their headquarters and nearly 1,500 jobs to the Dallas region. Such defections aside, San Diego is still seeing growth among both small start-ups and larger established firms. Several smaller firms set up or expanded operations in Downtown San Diego during the quarter.

Leasing activity has cooled a bit in the last several quarters. Trailing leasing (the sum of leasing in the four most recent quarters) declined by 13.9% in the third quarter, totaling 6.2 msf and falling short of the five-year average by 9.1%.

La Jolla-based Abacus Data Systems, which specializes in IT services for the legal sector, opened a third office totaling 5,300 square feet, while adding 50 employees in the last six months. Aspera Technologies opened its first San Diego office and second U.S. location, taking a suite at 501 W. Broadway. Also at 501 W. Broadway, and Albany, New York-based law firm Tully Rinckey PLLC announced that it would open its first San Diego office.

Savills Studley says these smaller leases will do little to reduce availability in Downtown San Diego. The rate for available space there is still very elevated, ending the third quarter at 18.1%, although it has fallen by 3.1 percentage points year-to-year.