San Diego’s office market still shows a great degree of uncertainty about the pandemic’s long-term effect with leasing and sales activity remaining low. In the second half of 2022, new leasing activity fell to its lowest level since 2020 and buyers begun showing more caution as interest rates have risen. Tenants are still relinquishing under-utilized office space, and there is approximately2.8 million SF of sublet space available, which is a 15-year high. However, the vacancy rate has shifted -0.2% to 10.9% over the past twelve months, narrowing the gap slightly from the 2019 year-end rate close to 9%. The absorption recovery has been driven by Class A inventory, with amenitized and well-located buildings generating demand while Class B/C offices have yet to recover since 2020.
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