To sum up, the San Diego office sector isn't in the best place — but some key fundamentals are trending in the right direction to start the year.
Beginning with the positives, sales surged by 127.4 percent to 880,700 square feet, the highest level recorded since the third quarter of 2023.
Also, rental rates went up to $3.07 per square foot full-service gross lease.
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With the negatives, leasing activity plummeted by 28 percent year-over-year to 1.1 million square feet, a report from Kidder Mathews shows. That came as vacancy ticked up by 160 basis points to 13.8 percent, up 90 basis points from the fourth quarter.
Demand trends presented a mixed picture. According to Kidder, total net absorption reached a positive 36,900 square feet, driven by "strong sublease activity." However, direct net absorption showed a decline, registering a negative 45,900 square feet.
While there were certainly some good signs from San Diego's office sector, how things will shape up in the future is tough to predict, especially in the short term, according to Kidder. The effects that potential corporate tax cuts, tariffs, and deregulation will bring, are unknown.
"The lack of implementation thus far makes it difficult to predict the market’s trajectory. Until these proposals take shape, many companies are adopting a wait-and-see approach," Kidder wrote.
"Once key policy decisions are finalized, stakeholders will be better positioned to evaluate long-term strategies, potentially unlocking a more active leasing and investment environment in the region."
The unemployment rate in San Diego was 4.4 percent, as of February. That's down 20 basis points since October but up 10 basis points year-over-year.
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