San Diego Office Footprints Shrink As Labs Move In
JLL survey of tenants who downsized finds 53% were displaced by office-to-lab conversions.
A JLL survey that tracked 60 office tenants in San Diego who have restructured their office footprints and downsized found that more than half of them were displaced by office-to-lab conversions.
The survey also revealed that, out of a total of 2.8M SF of office space in San Diego that was restructured by the tenants, 1.3M SF has been completely vacated and is now available on the market.
The JLL survey said that 53% of the downsizing leases in the San Diego market were the result of office-to-lab conversions; 43% of those surveyed reported that they reduced their office footprints when they renewed their leases in order to right size their office needs in the wake of the pandemic.
While the thriving life sciences hub has been the primary beneficiary of the office restructuring in San Diego in terms of office-to-lab conversions, other high-tech industries as well as financial services have been reevaluating office utilization rates and reducing their office footprints, JLL said.
JLL said that its survey indicated that tech offices have downsized by 37%, financial services by 24%, healthcare by 18% and business services by 10%.
JLL listed the top 10 office reductions in its survey and said that seven of these had been “displaced or backfilled” by biotech or other tech lab conversions. Two of the largest reductions in office footprints involved healthcare companies: AMN Healthcare reduced its footprint by nearly 175K SF, American Specialty Health shrank its office footprint by 85K. Finance of America reduced its footprint by 152K, JLL said.
Driven primarily by lab conversions, JLL reported that the Sorrento Mesa and Del Mar Heights submarkets have seen the highest rates of rightsizing and displacement by biotech conversions out of their submarkets.
The overall downsizing has bucked the trend of big expansions in the UTC and Rancho Bernardo submarkets in San Diego, fueled by its surging life sciences sector.
“Migration into the suburban areas of Rancho Bernardo represents flight to quality and proximity to talent,” JLL said.
JLL estimates that nearly 800K SF of office tenants that were displaced represents downsizing due to the adoption of remote work strategies.
Earlier this month, GlobeSt reported that downtown San Diego’s concentration of high-quality talent has become integral to the expansion of the life sciences sector in the region, which primarily has been focused on the UTC submarket.
In 2021, 139 life sciences leases were completed in the San Diego market, totaling 4M SF, an 80% increase from 2020, GlobeSt reported.