What is Next for the San Diego Office Market

The Bad News
Hybrid work will likely be a permanent business model, as opposed to a temporary solution to keep businesses running during a pandemic. Office usage in the U.S. continues to stagnate, and the economic environment is accelerating companies’ decision-making timeline on their long-term utilization of the hybrid workplace. If economic conditions remain uncertain, firms that lay off portions of their workforce may look to downsize their space or make it available for sublease.
 
The Good News
San Diego’s office market is experiencing economic headwinds to a much lesser extent than most of its West Coast counterparts, and recent projections indicate that a recessionary period will likely have only a minor impact on the market. CBRE’s Econometric Advisors projects a slight uptick in vacancy, followed by a recovery period with modest impacts on rents.

The Takeaway
San Diego’s office market is uniquely positioned to weather any change in office usage as work from home becomes a more permanent component of workplace trends. Life science conversions and significant leasing activity from Big Tech companies have continued to tighten the market by eliminating options for big blocks of space, while the traditional, smaller sized tenant mix in San Diego has been relatively unimpacted by working from home. Although sublease inventory has grown over the past few quarters, sublease availability and the vacating of space as a percent of total inventory has been relatively small compared to other major West Coast markets.