SAN DIEGO—Asking office rates in San Diego County rose to an all-time high in the market, causing the largest quarterly jump since Q4 2015 as tenants are willing to pay a premium for well-appointed space in prime locations, says CBRE SVP Matt Carlson. According to a report from the firm, average asking rates increased from Q2 to Q3 to $2.92 full-service gross—the highest ever for San Diego County—an increase of 2.6% quarter-over-quarter and 4.6% higher year-over-year.

The rise in rates didn't seem to affect office vacancy at all, with vacancy remaining flat for the quarter at 11% and net absorption at 97,729 square feet, marking five straight quarters of positive net absorption.

Carlson tells GlobeSt.com he expects asking rental rates to continue to rise even if the vacancy rate remains flat in this market, due “in large part to owners investing in their properties.”

Numerous renewals and expansions continuing to drive leasing activity, and few office deliveries are helping to drive up rental rates. No new office projects broke ground during the quarter, and the only new office delivery was Torrey Point, a two-building, class-A project in Del Mar Heights. The smaller 33,733-square-foot building in the project is fully vacant and available, while the 57,037-square-foot building is 60% leased to Tsunami ARVR. Current notable projects under construction are Makers Quarter Block D and 1800 Aston in Carlsbad, CBRE reports.

According to Carlson, “Not only is Block D the only new-construction building in Downtown in over a decade, [but] the cross ventilation, energy efficiency and exciting new neighborhood make it an ideal location for collaborative office users.”

As for office sales, activity was strong throughout Q3 after many properties remained on the market for sale at the end of Q2. A total of 11 office sales over $10 million transacted in Q3, with four deals landing in Downtown and two in Kearny Mesa. Sales Downtown included DiamondView, Five Thirty B, 600 B Street and 1420 Kettner. DiamondView set a Downtown record price per square foot of $661; Five Thirty B changed hands for the third time since 2014, sold by Bosa Development to Swift Retail Partners.

Carlson tells GlobeSt.com he expects asking rental rates to continue to rise even if the vacancy rate remains flat in this market, due “in large part to owners investing in their properties.”

Instant Insights /

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