San Diego Office Rents Justify New Spec Development

Tim Olson

The San Diego office market fundamentals now justify new construction activity, and it could mean a growing office construction pipeline this year. In the fourth quarter 2018, leasing activity and rent growth remained strong, setting the stage for more construction. For the year, office rents grew 9.5% for the year, a record high, while the vacancy rate fell to 11.5%, according to new research from JLL. New construction has already grown in San Diego, currently at 1.4 million square feet.

“We have seen declining vacancy rates over the last three years. Year-over-year, the decrease in vacancy wasn’t substantially different, but I think that trend line will continue into 2019,” Tim Olson, managing director at JLL, tells GlobeSt.com. “Plus, there was strong leasing activity in the fourth quarter that will put further downward pressure on vacancy rate. Lower vacancies and a lack of larger blocks of space in the central market will be a big factor in new construction, as well as continued leasing momentum and positive absorption from both the defense and life science markets. Those markets will continue to absorb larger blocks of space, with will in turn make supply less available. That will also drive additional new construction in the market.”