Mid-Size Users Drive Office Leasing
Leasing activity surged in the second quarter, and mid-sized office users lead the activity.
“With its best Q2 performance in five years, occupancy increased by 276,400 square feet in the second quarter of 2018, bringing overall growth through the first half of 2018 to 342,000 square feet,” Jolanta Campion, research director of San Diego at Cushman & Wakefield, tells GlobeSt.com. “Growth in the second quarter of this year was four times higher than in the first quarter, and also marked the 16th consecutive quarter of occupancy gains.” Campion says that mid-sized office users, and specifically tech and software companies drove the leasing activity during the quarter. Some of deals include AbacusNext, moving into 65,000 square feet at Eastgate Summit; Tocagen taking 39,000 square feet and Celgene taking 27,000 square feet at Genesis in Campus Point; and InhibiRX taking 34,000 square feet in Torrey Pines. But, the list goes on. “In Del Mar Heights, healthcare technology provider GreatCall relocated its headquarters to their newly custom-built 56,000 square feet space at Pacific Plaza while vacating their previous 29,000 square feet space in the building next door,” adds Campion. “Other notable occupancies include Southwest Antennas occupying 16,000 square feet in Rancho Bernardo, Interdigital moving into 14,000 square feet in Sorrento Mesa, and Robbins Arroyo’s purchase of a 24,000 square feet office building in Governor Park.”
Lease renewals made up a large portion of the activity at 42%, while intra-market migration made up 32% of leases and new-to-market companies made up 16% leases signed during the quarter. “During the same time period, the most active leasing industries have been technology with 1.5 million square feet; financial activities with 1.2 million square feet, life science with 1.1 million square feet, health care with 906,000 square feet; professional and business services at 760,000 square feet, and legal services at 341,000 square feet. Another mentionable industry for San Diego was Defense with 281,000 square feet of office leasing activity during over the last 12 months.”
While lease expansion was a minor driver of leasing activity—at only 10% of leases—they came from a broad swath of companies. “A lot of activity is coming from expansions with companies such as General Atomics, Bank of Internet, UC San Diego, GreatCall, NuVasive, and more signing larger leases to accommodate their growth in the last 12 months with some significant additional companies on the horizon,” Brett Ward, managing director of Cushman & Wakefield’s office division in San Diego, tells GlobeSt.com. “We have also seen some large migration as well with Amazon, WeWork, Lighthouse Strategies, InhibRX, and others opening up operations in San Diego recently.”