In the third quarter, the San Diego office market continued to see declining conditions. In the third quarter, the vacancy rate increased to nearly 12% and office absorption was negative 429,281 square feet. As a result, in the first three quarters of 2020, the San Diego office market has seen 1 million square feet in negative absorption.

Demand did not improve, but in fact, dropped in Q3. Whereas Q2 posted 165,142 square feet of negative net absorption, Q3 continued to see demand drop by an additional 429,281 square feet," Chris Reutz, research director for Colliers International's San Diego Region, tells GlobeSt.com. "Q4 may likely see decreased demand as the COVID pandemic increases its infection rate during the fall and many office tenants continue to implement work-from-home policies."

As a result, the office vacancy rate increased to its highest rate in three years. "This is largely due to new projects that were delivered in the last quarter, like Kilroy Realty's two-building One Paseo office project that added 288,484 square feet of newly completed class-A space to the Carmel Valley submarket," says Reutz. "With 11 buildings totaling more than 2.13 million square feet currently under construction countywide, the vacancy rates are likely to continue increasing in the coming months."