San Diego San Diego

|

San Diego is becoming one of the top technology hubs in thecountry—and it is having a big impact on the market's office realestate activity. In San Diego, technology sector has accounted for18% of total office leasing in the market in 2019, just behind lifesciences, the industry the market was known for. Over the lastdecade, technology presence has increased steadily, averaging 16%of total leasing activity in the market.

|

"Because the tech sector has been such an important driver ofgrowth in this business cycle, rents have increased faster in techmarkets than in the rest of the U.S. metro areas and mostsubstantially in tech critical cities such as San Diego,"Jolanta Campion, research director of San Diegofor Cushman & Wakefield, tells GlobeSt.com."For occupiers, any sharp increase in rents may make these marketsless attractive."

|

Rental rates have also surged as a result of technologyoccupiers. Average asking rents have increased 48% in the lastdecade, compared to 34% increase in office rents in the US. Class-Arents have increased 44% during the same period. "To put thesenumbers in perspective, during the last recession, that lastednearly two years, an average asking rent decreased by 20%,reflecting the worst-case scenario market has ever experiencedduring the recession," says Campion.

|

While rental rants have surged in San Diego, the growth has beenfar below more mature technology hubs, like San Francisco."Compared to San Francisco where average rent has increased 165%since its Great Recession low in Q4 2009, San Diego offers lessexpensive space, plenty of tech talent and is located an hourflight away from San Francisco tech hub," says Campion. "Shortercommute times, an incredible year-round weather and an abundance ofoutdoor activities can also be added to the list of benefits SanDiego offers." As a result, San Diego has been a top market for newtechnology companies and growing firms.

|

Geographically, the central county and Eastgate has been themost popular submarket for technology companies. In 2019, 88% ofall technology office leasing occurred in the central county. "2019was a banner year for Sorrento Mesa as well with respect to leasingvelocity and overall net absorption. The story of the submarketcontinues to be the trend of creative office and biotechconversions and repositions," says Campion. "Tech companies havebeen leasing all sizable blocks of space both existing and newdevelopment. Both product types continue to drive demand andleading market rents."

Want to continue reading?
Become a Free ALM Digital Reader.

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

Kelsi Maree Borland

Kelsi Maree Borland is a freelance journalist and magazine writer based in Los Angeles, California. For more than 5 years, she has extensively reported on the commercial real estate industry, covering major deals across all commercial asset classes, investment strategy and capital markets trends, market commentary, economic trends and new technologies disrupting and revolutionizing the industry. Her work appears daily on GlobeSt.com and regularly in Real Estate Forum Magazine. As a magazine writer, she covers lifestyle and travel trends. Her work has appeared in Angeleno, Los Angeles Magazine, Travel and Leisure and more.